where to store disk cache / database when working with 2 drives (for Premiere and AE)

The Flash storage in the Apple Silicon based Macs is wicked fast.  You are fine using the 2TB Macintosh HD for macOS, applications, and scratch disk/media cache.  

Store as many documents as possible on the external SSD. 

If anything, I would get a second, matching external SSD and schedule Carbon Copy Cloner to clone the primary one that you work from to the backup one nightly.  

In both programs, I also have the Disk Cache size limited to 200 GB and wonder if there is an optimal size or if this is fine?

By @VideoHound

I am not the best authority on this, but I like to have at least 500GB for my external SSD that is only used for caches and Photoshop scratch files. My current is 1TB.

1. Start using the internal storage for either media or cache files, against the advice of the article above - I noticed I am currently using less than 200 GB out of 2 TB, so it seems like wasted space that I could be using. But I don't know if performance will be significantly impacted if I start using the internal storage for this purpose.

By @VideoHound

My guess is that performance might increase if you do that, for these reasons:

You have almost 2TB of unused internal storage, so even if you limited cache to 500GB or 1TB, it looks like you will still have far more than the 200GB I like to always keep free on my internal Mac system volume.

Performance should not drop, because the article is written from the point of view of hard drives several years ago: Making the system, application, and caches all read/write from the same hard drive would slow it down considerably because of the physical time required for the mechanical drive heads to move between each data location on the disk platters. The only way to get around it is to spread out the work across multiple hard drives, so some transfers can happen in parallel.

But SSDs aren’t limited that way. In addition to being able to read almost instantly from any memory location, they have multiple data channels to the controller, so multiple data streams can be read/written at full speed simultaneously. So parallel transfers are already built in. The larger the SSD, the more data channels it tends to have, so larger SSDs are often faster. Also, an external SSD today connected by USB (10Gb/sec) is 5 to 6 times faster than the fastest hard drives, so even a fast hard drive RAID can’t beat one of today’s cheap SSDs.

Performance might increase if your caches are on internal storage, because the problem with external storage is that although SSDs can now go as fast as 7000MB/sec or more, the fastest affordable external protocol is Thunderbolt 4, which for data transfers is limited to roughly 3000MB/sec real world, which means over half the potential speed of that SSD can’t be used if external. If an SSD is connected via USB 3, it’s limited to around 1000MB/sec on current Macs. But your Mac model probably has a 7000+MB/sec SSD inside it, so if you can use internal storage without reducing free space too much, caches can potentially run much faster on your very fast internal Mac storage.

Another issue I run into when storing the cache on the external drive is that occasionally I launch Premiere or After Effects first before attaching the external drive. Doing so causes Adobe to reset the cache locations back to their default on the internal drive. Is there any way to avoid that, aside from just remembering to always attach the drive first?

By @VideoHound

Yes, it’s extremely annoying that if you plug in the drive later it won’t restore the path in the settings and will go internal. My caches are external because I don’t have room on internal storage, so I do have to make myself always remember to plug in that cache SSD before starting the Adobe video apps.

To help avoid this, I now leave the external cache SSD attached to my Thunderbolt desktop dock. At my desk, I always plug the MacBook Pro into the dock (for the one-cable connection to multiple displays, storage, peripherals, and power), and that means the cache drive always mounts through the dock. But, if I am away from the desk, I still have to remember to plug in the external cache SSD first, if I brought it along to edit video on the go.