Variance is not directly related to the size of the stakes. Micro-stakes tables can also have very high variance which can be exploited though solid poker strategy.
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Many people think that variance (the up and down swings in stack and bankroll) is lower at micro-stakes tables, making them safer to play. After all, if each hand is only worth 20 cents, how much variance can there be? When decent players post nice winrates at micro-stakes tables they are led to believe that these tables are low variance, when just the opposite is true.
Winrate (the amount you win over time) does not really have any effect on the variance of a particular game. When players move up to higher stakes, they tend to blame larger losses on an increased level of variance (which does not actually exist) instead of the fact that there are better players, and their winrate is lower.
When charting variance across different levels of stakes, the variance begins at a medium level at the micro-stakes tables. Then it actually dips down lower at the small stakes tables, before taking a massive swing upwards at the high-roller tables. This does not correspond to winrate, as the highest winrates are found a micro-stakes, not at the small stakes (although there is a very nice spot around the low end of small stakes which marks a nice plateau for winrate at a low variance).
So if micro-stakes variance is so high, how can I make money there?
The variance is higher at micro-stakes because you tend to have bigger pots, which mean you lose or win more each hand than you would at higher stakes. How does that make your winrate higher? Simple, the fact that the reason these pots are larger is because they are fuelled by fish and calling stations who make irrational calls and refuse to fold. They keep putting money in the pot, making your value bets hugely profitable.
A good player will experience more variance at micro-stakes due to these higher pots, but will also win a much larger portion of these hands than they would at higher stakes, where players know better than to keep calling on improbable draws.
Of course, even bad players get lucky sometimes and you will lose these large pots every now and then. All it takes is a few of these bad-beats in a row to really drop your stack and show the kind of variance that actually exists at the micro-stakes tables.
So why do people think that the only high variance games are the high stakes tables?
First off, it is simply the sheer dollar amounts. Five thousand dollars naturally looks like a lot more than fifty cents, but relative to the bankrolls and the cost of the game that fifty cents can be a lot more money.
More importantly is the rapidly decreasing gap between the good and bad players at high stakes. You no longer find rich morons playing $25/$50 NLHE anymore; nearly everyone at those stakes has some poker skill. This means that players at this level have to make high variance plays more and more in order to gain an edge. A simple Cbet as a bluff may not work at that level; instead players need to go all in. This leads to higher variance.
At the end of the day, variance is relevant to players at every single level, and there is no correlation between skill and variance. It is a mistake to think that it is impossible to lose a lot at micro-stakes.