Greythorn Option Flow Model 23rd November 2022

BTC and ETH TL;DR

Bitcoin & Ethereum are down 22.59% & 27.69%, respectively, over the past fortnight. Greythorn views that Bitcoin will range between $14,000 and $18,500 over the upcoming week based on our option flow model.

GREYTHORN OPTION FLOW MODEL

Crypto markets are on high alert among fears of a broader credit contagion caused by the FTX/Alameda fallout. As a result, price decreased from over $20,000 to $16,250.

Numerous vol sellers have withdrawn liquidity after this downside shock & we can expect heightened volatility at a series of price levels that contain negative option supply, namely $12,000, $15,000, $17,000, $18,000, $19,000 and $20,000.

• If the price decreases, $16,000 is the first significant support, followed by $14,000 as the second support level.
• If the price increases, $16,500 and $17,500 are two weak resistances, whose strength would decrease after this week’s considerable monthly OpEx on Friday.
• Several weak resistance levels can be observed if price rises further, such as $18,500, $21,000 and $22,000.

Re-iterating that gamma supply has turned positive to negative, increasing the likelihood for more volatility with higher crash risk. Considering UK & German PMI data will be released on Wednesday, followed by German GDP on Friday, investors should be wary of any spillover effects from these macro announcements. Additionally, US FOMC minutes will be released on Thursday, along with Crude Oil Inventories and Initial Jobless Claims.

Greythorn believes that Bitcoin will range between $14,000 and $18,500 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

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.