Bitcoin Market Analysis - May Part 1

BTC and ETH TL;DR

• Bitcoin & Ethereum are up 0.11% and down 1.24%, respectively, over the past fortnight.
• Greythorn views that Bitcoin will trade below $31,000 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 judgment regarding how positioning across derivatives markets may influence the movement of Bitcoin. 

Although markets have their eyes on meme coins, major cryptocurrencies remain relatively flat. Retreating a few basis points over the past weekend, Bitcoin repositioned itself at ~$28,500 on Monday morning. 

From the perspective of options supply, increased volatility can be expected at several price levels, including $27,000, $28,000, $28,500, and $30,000.

If the price drops further, there are few support levels except for a relatively weak one at $26,000, which will lose its potency by Friday. If the price increases, $29,000 and $29,500 are the first two resistances, $31,000 is the third & finally, a significant resistance zone lies between $31,500 and $35,000.  

Gamma supply remains positive at approximately the same level as a fortnight ago, indicating relatively stable market conditions over the following week. It can also be observed that the magnitude of liquidity-taking is larger than that of liquidity provision, particularly at $30,000.

Turning the attention to traditional markets, several notable macro indicators from the US and UK are due this week. US CPI is set to be released on Wednesday followed by Crude Oil Inventories and PPI on Thursday. Thursday will also see the UK will also publish its interest rate decision and updates on its monetary policy, along with GDP on Friday. Participants should be aware that any unexpected announcements may trigger an uptick in vol.

Greythorn believes that Bitcoin will trade below $31,000 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

Important notice and disclaimer

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