Bitcoin Market Analysis – May Part 1

May 10, 2023


  • 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. 

Figure 1: Greythorn Option Flow Model 080423. Source: Proprietary – Greythorn Research Team.
Data: Deribit.

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

This presentation has been prepared by Greythorn Asset Management Pty Ltd (ABN 96 621 995 659) (Greythorn). The information in this presentation should be regarded as general information only rather than investment advice and financial advice. It is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. In preparing this document Greythorn did not take into account the investment objectives, financial circumstances, or particular needs of any recipient who receives or reads it. Before making any investment decisions, recipients of this presentation should consider their own personal circumstances and seek professional advice from their accountant, lawyer, or other professional adviser. This presentation contains statements, opinions, projections, forecasts, and other material (forward-looking statements), based on various assumptions. Greythorn is not obliged to update the information. Those assumptions may or may not prove to be correct. None of Greythorn, its officers, employees, agents, advisers or any other person named in this presentation makes any representation as to the accuracy or likelihood of fulfilment of any forward looking statements or any of the assumptions upon which they are based. Greythorn and its officers, employees, agents and advisers give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this presentation. None of Greythorn and its officers, employees, agents and advisers accept, to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information contained in this presentation. This presentation is the property of Greythorn. By receiving this presentation, the recipient agrees to keep its content confidential and agrees not to copy, supply, disseminate or disclose any information in relation to its content without written consent.

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