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Bitcoin (BTC) Bulls Bet Big on Higher Prices

Bitcoin bulls show confidence in higher prices as traders grab cheap out-of-the-money call options despite overbought conditions signalled by the RSI.

ShahZaib Ahmed

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Bitcoin (BTC) Bulls Bet Big on Higher Prices

Bitcoin (BTC) has posted seven straight days of price gains, although momentum slowed over the weekend. This coincided with the relative strength index (RSI) on daily timeframes moving above 70, which could increase some players’ appetite for short-term profit-taking.

However, crypto traders are grabbing cheap out-of-the-money (OTM) bitcoin call options, demonstrating conviction in higher prices ahead. Bitcoin bulls show confidence in higher prices as traders grab cheap out-of-the-money call options despite overbought conditions signalled by the RSI.

OTM Calls in Focus

According to Kelly Greer, who serves as the Head of Americas Sales at Galaxy, there have been notable inflows into calls with strike prices ranging from $50,000 to $75,000 across April to June maturities.

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Activity in the options market has proven a reliable indicator of impending bitcoin price swings. The recent bullish flows are similar to late 2020 and early 2021 when experienced traders consistently bought OTM calls at strikes as high as $80,000. Bitcoin has nearly doubled since early October to around $50,000. Prices are up from $38,500 over the past three weeks amid strong exchange-traded fund (ETF) inflows. 

Cautious of Overbought Conditions

According to Alex Kuptsikevich, senior analyst at FxPro, Bitcoin experienced its seventh consecutive day of gains, although its strengthening slowed over the weekend. This coincided with a rise above 70 on the RSI on the daily timeframes, potentially heightening investors’ inclination towards short-term profit-taking.

An RSI above 70 signals overbought conditions, often interpreted as an impending trend reversal. However, it indicates a market has rallied quickly in a short timeframe and may see a correction. So, while some observers point to the elevated RSI as a sign Bitcoin’s latest rally may correct lower, the positioning in the options market suggests professional traders see room for substantially higher prices in coming months.

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