Institutional Investors Lack Conviction in Bitcoin Despite Bullish Bets

Despite bitcoin's recent 7% price surge to $74,434.13, market conviction remains weak due to the recovery stalling near $72,000 ahead of key risk events, including the upcoming US inflation report and US-Iran talks. Institutions are adopting a cautious strategy, as seen in the options market where they are buying calls to bet on price gains while also purchasing 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 $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 for downside protection. 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 supporting the case for Fed rate increases and weighing on risk assets like bitcoin. The outcome of the US-Iran talks in Pakistan will also be crucial for financial market stability, with a positive outcome potentially accelerating bitcoin's rally. Meanwhile, 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, indicating calmer conditions in the bond market and a positive signal for crypto bulls.