BTC and ETH TL;DR
Greythorn Option 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.
After dropping to the lowest level in two weeks due to the financial troubles facing Silvergate, Bitcoin has started testing $22,000 over the past weekend. Opening at ~$22,500, Bitcoin is currently trading flat in expectation of encouraging economic data from China.
From the perspective of option supply, increased volatility can be expected at intervals between $15,00 & $22,250 and $23,000 & $26,000.
If price decreases, no price levels can be found as support. In comparison, there is more resistance to the upside. $24,000 and $25,000 can be regarded as two significant resistance levels, followed by the interval between $27,000 and $30,000 as a less effective resistance zone should price rise further.
Option supply has increased, indicating relatively more stability for the following week. However, considering the US's economic outlook and recent monetary policy actions that are set to be testified on Thursday by Fed Chair Powell, together with Japanese GDP on the same day, crypto traders should remain cautious of any sharp moves. In addition, Japanese monetary policy, UK GDP, German CPI & Chinese CPI are in queue to be released on Friday. With US Unemployment & a speech by ECB’s Lagarde on the following day, markets may still have further room to move after last month’s OpEx.
Greythorn believes that Bitcoin will trade below $25,000 over the upcoming week based on our option flow model.
For an introduction to Greythorn Option Flow Model, please refer to our newsletter from 8th June 2022. https://greythorn.substack.com/p/greythorn-asset-management-newsletter
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