Volatility clusters everywhere — the general phenomenon is covered in why volatility clusters. Knowing which mechanism is doing the work in a given market tells you how long a cluster is likely to persist and what would end it.
The leverage engine
A move liquidates leveraged positions. Liquidations are market orders in the direction of the move, so they extend it. The extension liquidates more positions. That is the cascade in liquidation cascades, and it is a genuine feedback loop with a mechanical trigger rather than a behavioural one.
Critically, it is self-limiting. Each liquidation removes leverage from the system permanently, so the fuel is consumed as it burns. Once the leveraged positions in a price region are gone, the amplification stops — and it cannot restart until new leverage accumulates.
Which is why crypto clusters are sharp and short
Equity volatility clusters are sustained substantially by dealer hedging, and dealer inventory is replenished continuously as new options are written. The mechanism does not exhaust itself.
Leverage does. So crypto tends to produce violent clusters that resolve faster: an intense flush, then an abrupt calm as the market discovers there is nothing left to force out. That decay is visible in open interest collapsing during the event.
The tell for whether it is over
Not price stabilising — price can stabilise with leverage still stacked. The read is whether open interest has actually come down and whether funding has normalised from whatever extreme preceded the move.
A move that unwound the leverage and one that merely paused look identical on a chart and completely different in the positioning data, which is precisely what that data is for.
And the second engine
Liquidity withdraws during stress. Market makers widen, on-chain providers pull depth for the reasons in impermanent loss, and the same flow moves price further. That one is behavioural rather than mechanical, and it recovers when conditions calm rather than being permanently consumed.