Bitcoin Market Analysis- July Part 1

BTC and ETH TL;DR

• Bitcoin & Ethereum are up by 7.17% & 3.06%, respectively, over the past fortnight.
• Greythorn views that Bitcoin will trade between $29,000 and $34,000 over the upcoming week based on our option flow model. 

Greythorn Flow Model:

Greythorn’s view of markets is significantly dependent on supply & demand mechanics. As crypto markets mature & attract large flows of capital, their derivatives markets also grow. Derivatives markets tend to have a large influence on their underlying assets as market participants tend to hedge their exposure through spot & futures markets. Our proprietary option flow model has been developed in-house to inform our judgement regarding how positioning across derivatives markets may influence the movement of Bitcoin. 

Figure 1: Greythorn Option Flow Model 030723. Source: Proprietary - Greythorn Research Team. Data: Deribit

Bitcoin broke past $30,000 for the second time since April this year as investors continue to build on the spot ETF narrative fuelled by large bids from MicroStrategy. Over the weekend, Bitcoin held its position above $30,000 and opened at $30,616 for the week.

From the perspective of options supply, increased volatility can be expected at several price levels, including $30,000, $32,000, $33,000, and $35,000.

If the price decreases, $29,000 is the first and only weak support level. 

If the price rises further to the upside, $31,000 is the first significant resistance, followed by $31,500 as the second. Should Bitcoin successfully move past these two levels, $32,500, $34,000, and the interval between $36,000 and $40,000 are the following relatively weak resistance levels.

Gamma supply is ~40% higher than that of two weeks ago, suggesting a relatively stable market for this week. Liquidity provision has continued to dominate for the third consecutive fortnight, particularly at $31,000. 

A range of economic indicators from the US is set for later this week, with the potential for any heightened volatility to flow over to digital asset markets.

• ISM PMIs: Manufacturing, Services, and Non-manufacturing will be published on Wednesday, Thursday, and Friday, respectively. 
• Employment Data: Initial Jobless Claims on Wednesday, JOLTs Job Openings on Thursday, and Unemployment on Friday.
• Crude Oil Inventories are also set to be released on Friday. 

Greythorn believes that Bitcoin will trade between $29,000 & $34,000 over the upcoming week based on our option flow model.

For an introduction to Greythorn’s Option Flow Model, please refer to our newsletter from 8th June 2022. https://greythorn.substack.com/p/greythorn-asset-management-newsletter

The information contained within this newsletter is purely our opinion and should not be considered by readers to constitute any form of financial or investment advice. We encourage readers to conduct their own research into any financial product that they are interested in and Greythorn will not incur any liability for potential losses.

Important notice and disclaimer

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