After undergoing a brief correction from the new yearly high of $35,300, Bitcoin (BTC), the market’s leading cryptocurrency, is showing signs of renewed bullish momentum.
As the digital asset approaches the $35,000 mark once again, a key indicator is following patterns observed in 2020, pointing to a potential surge that could push Bitcoin to regain its previous peak of $65,000.
Scott Melker, a prominent crypto investor and host of the ‘Wolf of All Streets’ podcast, points out the importance of Bitcoin’s overbought Relative Strength Index (RSI) on both lower time frames and the weekly chart, indicating a promising trajectory for the price of the cryptocurrency.
BTC’s RSI Flashback 2020
Bitcoin’s RSI, a widely used technical indicator that measures the strength and speed of price movements, is currently showing signs of extreme overbought conditions on several lower time frames.
It is notable that the daily RSI is 88, indicating that there may be a need for a healthy retracement. However, the weekly RSI is drawing attention because it has just entered the overbought zone, a range that has historically been associated with substantial upward moves in a true bull market.
To gain insight into Bitcoin’s potential future trajectory, it is worth revisiting the patterns observed in 2020.
According to Melker, Bitcoin’s RSI became overbought on the weekly chart that year when the cryptocurrency was trading around $12,000, as indicated by a small blue circle at the bottom left of the chart above.
Bitcoin then started an unprecedented rally, rising to $65,000. This historical precedent highlights the possibility of similar price action if true bullish catalysts emerge.
With Bitcoin’s weekly RSI once again entering overbought territory, sentiment is growing among market observers that the cryptocurrency has plenty of room to operate.
Scott Melker emphasizes that if significant bullish catalysts emerge, Bitcoin’s potential for further upside becomes virtually limitless. Current RSI readings indicate the potential for a prolonged price rally, potentially allowing Bitcoin to surpass its current highs and reach the coveted $65,000 level.
Bitcoin market dynamics are changing as key indicators rise
Adding to Melker’s bullish outlook for BTC, crypto analyst Miles Deutscher stated on X (formerly Twitter) that the Bitcoin market landscape has witnessed a remarkable shift in recent days, leading to a significant increase in bullish sentiment.
Notably, volume and open interest in Bitcoin-related futures and options on the Chicago Mercantile Exchange (CME) have risen to multi-month and multi-year highs, indicating growing interest and participation from institutional investors.
Additionally, call option open interest has surpassed the peak levels of the 2021 bull run. Coupled with these developments, the average crypto-related stocks have seen a substantial increase, and public funds have seen a massive inflow of $43 million into Bitcoin, equivalent to 10% of the year-to-date inflows, all in one day .
These numbers reflect increased trading activity and liquidity in the Bitcoin derivatives market, indicating increased institutional interest. Such a rise in trading volume often precedes significant price movements, leading some analysts to anticipate a possible bullish breakout soon.
Another encouraging sign for Bitcoin’s prospects lies in call option open interest, which recently surpassed $10 billion. To put this in context, during the peak of the 2021 bull run, open interest on call options was $9.9 billion.
This milestone suggests that market participants are increasingly positioning themselves for a possible rise in Bitcoin’s price. The growing number of call options indicates bullish sentiment among traders, further fueling expectations of a potential price increase.
At the time of writing, Bitcoin is trading at $34,500, successfully regaining the levels it briefly lost during a recent correction on Tuesday. Over the past 24 hours, Bitcoin has gained 1.4%.
Featured image from Shutterstock, chart from TradingView.com