Lack of Conviction in Institutions' Bitcoin Positioning; CPI and Iran Talks May Provide Clarity

Although bitcoin's price has surged by nearly 7% since Sunday to $70,768.91, the recovery has stalled near $72,000 due to key binary risks, including the upcoming US inflation report and US-Iran truce talks. Institutions are adopting a cautious approach, evident in the options market where they are buying calls while also seeking downside protection. According to QCP Capital, options for BlackRock's spot bitcoin ETF show demand for the $45 call expiring in May, indicating expectations of a price increase. Similarly, bitcoin options on Deribit have seen significant interest in the $80,000 call. However, the demand for puts, which offer protection against declines, remains steady. The options skew, which measures the price differential between calls and puts, remains negative across all time frames, indicating a lingering bias towards put options. The US consumer price index for March is expected to show a significant increase in annualized inflation, primarily driven by rising energy prices. This may lead to market volatility, particularly if the core figure exceeds the estimated 2.7% annualized rate, potentially weighing on risk assets like bitcoin. The weekend 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 decline in uncertainty around inflation and interest rates, potentially indicating a green signal for crypto bulls.