Crypto Market Insights July 2022 — Technical Levels and Option Flow

*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.

Summary

Overall market:

  • BTC is down 73% from all-time highs.
  • BTC is ranging between $18,750 and $21,900.
  • Volatility increased from 70% to 90%.
  • Combining technical levels with our option flow model, we are expecting Bitcoin’s price to range between $17,600 and $21,500 over the next week.

Significant price levels:

  • Supports: $18,750 and $17,600.
  • Resistances: $19,700 and $21,900.

Technical Levels

Bitcoin ranged between $18,750 and $21,900 over the last fortnight. It reached a local high at $21,888 on 26th June, which was successfully called in our previous newsletter. $20,000 was a temporary support, with the price eventually breaking down at this level after eight trading days. There were seven consecutive red candlesticks since 26th June, and it finally found its current support level at around $18,750.

Figure 1: Bitcoin Volatility Index (BVIN). Source: Glassnode -Greythorn Research Team.

Regarding volatility, volatility dropped from 108% to 70% after the decline in early June. However, volatility has caught a bid since last Sunday and is currently at 90%. Downside risk will always be the key focus during a bear market which is why we can expect more changes like this across volatility.

Figure 2: BTCUSDT 4H Price (Binance). Source: TradingView — Greythorn Research Team.

We forecast that Bitcoin will continue to range between $17,600 and $22,00 over the following week.

  • The first support level is at around $18,750, followed by the second support level, which was a recent low, at approximately $17,600.
  • The first resistance level is around $19,700, followed by a second resistance level at approximately $21,900, which Greythorn’s Option Flow Model also indicates.

For more information regarding support and resistance levels, please refer to Support (Support Levels): https://www.investopedia.com/terms/s/support.asp and Resistance (Resistance Levels): https://www.investopedia.com/terms/r/resistance.asp.

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.

Figure 3: Greythorn Option Flow Model 040722. Source: Proprietary -Greythorn Research Team. Data: Laevitas.

Bitcoin opened at $19,297 this week after displaying weakness over the past week. Increased volatility is expected at a series of price levels that have extremely negative net GEX, namely $18,000, $19,000, $20,000 and $21,000. As per the graph above, there are currently no significant support levels. However, $18,600, $18,400, and $14,500 can be regarded as very weak support levels. There is a strong resistance level at $19,500 with a large net GEX. $20,500 and $21,500 are likely the second and third resistance levels if Bitcoin increases past $20,000. The market will likely be more volatile than last week, as indicated by lower negative GEX and fewer support levels.

In summary, Greythorn views that Bitcoin will range below $21,500 based on our option flow model. In conjunction with our technical analytics, both techniques display that the market is likely to be more volatile over the upcoming week than it was over the past week.

For an introduction to Greythorn Option Flow Model, please refer to our newsletter from 22nd June, 2022. https://greythorn.substack.com/p/greythorn-asset-management-newsletter.

References

Squeeze Metrics, ‘The implied order book’, 2020.

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Greythorn Asset Management

Greythorn Asset Management

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Melbourne-based asset management firm, focused primarily on Tech | Web3 | Crypto | Blockchain | DYOR/NFA. Subscribe to hear our latest industry insights.