I have the same problem, like the OP describes it looks like the mouse cursor has a panic attack. Shivering and dancing within a one inch radius.
But contrary to the others, and the suggested solutions for them, my Win10 install is 100% fresh, just installed, created as per MS MCT. Thus "repair" is of no use.
Also, updating even some voluntary drivers did not help.
And I don't have a touchpad, nor a touch monitor. Instead a good Dell.
Scrolling through the prior 58 replies hasn't turned up a solution for my case.
I do understand the incredible feat of Windows (not just 10) to cater for gazillions of HW and SW combinations, and many times successfully (aka for many users it works). In fact, I have an other Win10 installation on the same Dell which works well, without that panicking cursor.
I had read the (now old) news about the many diifferent problems caused by the Win10 20H2 update, and so I was hoping when I update again now, it would be solved. The update ran just now, and it's not solved unfortunately.
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On a positive note however: The by myself reported "frequent auto opening of Edge" is solved. Now Edge behaves well, aka starts only when the user = owner of the computer instructs Edge so.
In fact, like I said there and then: In almost every regard, and many may now listen up surprised(!), the Edge browser has become much better = user-friendlier, and much safer, than any other browser. And Chrome is the worst. Particularly in terms of data privacy. Ordinary users cannot even imagine what is leaking out through Chrome features that no setting can prevent.
Meanwhile I even got used to, and now love, the possibility to straight away "Open" (install) downloaded programs and stuff. I would today say, the only drawback of Edge these days is, that Edge doesn't have nor offer a "Multi Container" solution like Firefox. This is ESSENTIAL in our times of online trackers, retargeting ads, etc. everywhere. And so, for many things I still have to revert to Firefox, yes. But I trust some RedBull binging "developers" in MS are feverishly working on a "Multi Container" native feature or extension, so I remain optimistic. :)