Crypto Market Insights 14th September 2022
MARKET SUMMARY
- Bitcoin & Ethereum are up ~2.81% & ~9.26%, respectively, over the past fortnight.
- The Ethereum network is set to complete its final stage of the Merge tomorrow, the 15th of September. This will mark the beginning of its Proof-of-Stake (PoS) era.
- US CPI came in higher than anticipated at 8.3% vs 8.1% est., leading to a -8% close for the Crypto25 Index on the day.
- Traditional markets, the S&P 500 & the Nasdaq 100, are down ~2.53% & ~3.64%, respectively, over the past fortnight.
- Greythorn views that Bitcoin will remain between $18,000 and $25,000 over the upcoming week.
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 increasing sharply over the past weekend, Bitcoin opened at $21,836 on Monday in anticipation of this week's economic data releases.
Increased volatility is expected at a series of price levels with negative option supply (Net GEX), including $19,000, $20,000 and $24,000.
Should price decrease, $21,000 followed by 18,000 are the only two significant support levels observed. On the upside, $22,000 can be regarded as the first resistance level, followed by $23,000. Price levels beyond $25,000 form a continuous resistance zone.
Option Supply finally rebounded from negative to positive after weeks due to the concentration in the August expiration. This should be prevalent in the improved liquidity of the market over the coming week. This supply has allowed liquidity provision to support the market from its local lows. However, considering US inflation data came in higher than estimates, coupled with the Ethereum Merge scheduled for the 15th, participants should remain wary as to leaning their deltas too heavily on either side.
Greythorn believes that Bitcoin will range between $18,000 and $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
DISCLAIMER
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.