BTC and ETH TL;DR
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 judgment regarding how positioning across derivatives markets may influence the movement of Bitcoin.
Figure 1: Greythorn Option Flow Model 180623. Source: Proprietary - Greythorn Research Team. Data: Deribit.
Affected by the SEC lawsuits against Binance and Coinbase, crypto markets suffered selling pressure over the past fortnight. However, due to last week’s pause in interest rate hikes, Bitcoin recovered to above $26,000 and opened at $26,336 on Monday morning.
From the perspective of options supply, increased volatility can be expected at several price levels, including $24,000, $25,500, $26,000, and $27,000.
If the price decreases, $25,000 is the first weak support level, followed by the interval between $20,000 and $23,000 as a broader support zone. To the upside, the interval between $27,000 and $34,000 forms a large resistance zone. Specifically, $26,500 is the first significant resistance that the price needs to challenge, followed by $28,000 and $29,000.
Gamma supply is ~25% higher than that of two weeks ago, suggesting a flatter market for the following week. Liquidity provision continues to dominate, particularly at $30,000.
Considering the macro data from traditional markets to be released in the second half of this week, increased volatility can potentially flow through to digital asset markets.
Greythorn believes that Bitcoin will trade between $25,000 & $30,000 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.
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