Lack of Conviction in Institutional Bitcoin Positions; CPI and Iran Talks May Provide Clarity

Despite a 7% rally in bitcoin's price since Sunday to $71,010.82, 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 stance, chasing upside via call options 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 rise above the current $40. Similarly, bitcoin options on Deribit have seen flows towards the $80,000 call. However, the demand for puts, which offer protection against declines, persists, as evident in the negative options skew across all time frames. 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 volatility if the core figure exceeds the estimated 2.7% annualized rate, potentially weighing on risk assets like BTC. The meeting between Iranian and US delegates in Pakistan may hold the key to financial market stability, with a potential end to the war and normalization of oil tanker traffic through the Strait of Hormuz likely to accelerate BTC's rally. The ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in US Treasury futures, has dropped to 74% after rising to 115% in March, indicating a calm bond market and a positive signal for crypto bulls.