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

Despite a 7% rally in bitcoin's price since Sunday, conviction in the market remains weak, with the recovery stalling near $72,000 ahead of key events such as Friday's US inflation report and US-Iran truce talks. Institutions are adopting a cautious approach, evident in the options market where they are buying calls to bet on price gains while also purchasing puts to protect against potential declines. According to QCP Capital, demand for calls tied to BlackRock's spot bitcoin ETF shows traders expect the price to rise above $45 from the current $40. Similarly, options on Deribit have seen demand for the $80,000 call, but the demand for puts persists, indicating a lingering bias for downside protection. The US consumer price index for March is expected to show a significant increase in annualized inflation, led by rising energy prices, which could lead to market volatility if the core figure exceeds estimates. The meeting between Iranian and US delegates in Pakistan over the weekend will also be crucial for 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 sharp spike in March, indicating rising uncertainty around inflation and interest rates, but has since dropped back, providing a green signal for crypto bulls.