Crypto Market Insights 9th November 2022

Market Summary

• Bitcoin & Ethereum are down 5.69% & 2.79%, respectively, over the past fortnight.
• Binance is set to fully acquire FTX after the exchange suffered a bank run following CZ's comments on $FTT.
• Arweave partnered with Meta to assist the tech giant in storing data for digital collectibles. Its token, $AR, increased by more than 60% following the news.
• JPM executed their first DeFi trade on the 2nd of November. It was based on Polygon using a smart contract from Aave.
• The Federal Reserve raised rates by 75 bps at its November meeting.
• Traditional markets, the S&P 500 & the Nasdaq 100, are up 1.75% & 2.31%, respectively, over the past fortnight.
• Greythorn views that Bitcoin will range between $18,000 and $22,000 over the upcoming week based on our option flow model.

Greythorn Option Flow Model

Following the >4% increase on Friday after last week’s OpEx, Bitcoin fell & repositioned itself at $20,998 over the weekend.

Increased volatility is expected at a series of price levels with negative option supply, namely the interval between $14,000 and $17,000, $18,500 to $20,000, $20,750, $23,000 and $25,000.

Bitcoin is currently hovering around a key level at $21,000.

• If price decreases, $20,500 is the first support, followed by $20,000 as the second support after this week’s OpEx. $18,000 can be considered a third support.
• Should price increase, $22,000 is the strongest resistance level, while $24,000 can be considered a relatively weak resistance.

Option supply is largely positive, explaining the recent trading range after last week’s brief rally. This supply is observable on the graph by viewing the magnitude of liquidity provision over liquidity-taking, particularly at $22,000.

Traders will be eyeing this week’s midterm elections in the US and CPI release on Friday, accompanied by UK GDP and German CPI data on the same day. It’s important to note that this market always welcomes catalysts like these when getting ready for the next move.

Greythorn believes that Bitcoin will range between $18,000 and $22,000 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

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.