Lack of Conviction in Institutional Bitcoin Investments; CPI and Iran Talks May Bring Clarity

The recent 7% surge in bitcoin's price to $70,796.80 has not been accompanied by strong conviction, as the recovery has stalled near $72,000 ahead of significant events such as the US inflation report and US-Iran truce talks. Institutions are adopting a cautious strategy, purchasing call options to bet on potential gains while also buying downside protection. According to QCP Capital, there is demand for the $45 call expiring in May for BlackRock's spot bitcoin ETF, indicating expectations of a price increase above the current $40. Similarly, bitcoin options on Deribit have seen significant interest in the $80,000 call. However, the persistent demand for puts, which offer protection against declines, suggests a lingering bias towards caution. The US consumer price index for March is expected to show a significant increase in annualized inflation, primarily driven by rising energy prices. This could lead to market volatility, particularly if the core figure exceeds the estimated 2.7% annualized rate, potentially leading to further interest rate increases and negatively impacting risk assets like bitcoin. The upcoming meeting between Iranian and US delegates in Pakistan may also impact financial market stability, with a potential end to the war and normalization of oil tanker traffic through the Strait of Hormuz likely to accelerate bitcoin's rally. The ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in US Treasury futures, has shown a decrease in uncertainty around inflation and interest rates, indicating calmer conditions in the bond market and a positive signal for crypto bulls.