Lack of Conviction in Institutions' 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 chasing upside via calls while also buying downside protection. According to QCP Capital, demand for the $45 call expiring in May is high, indicating expectations of a price rise above the current $40 level. Similarly, bitcoin options on Deribit have seen significant flows, with the $80,000 call emerging as a popular bet. However, demand for puts, which offer protection against declines, persists, revealing a lingering bias for put options. The US consumer price index for March is expected to show a marked increase in annualized inflation, led primarily by rising energy prices. This could lead to market volatility, particularly if the core figure exceeds the annualized 2.7% estimate, further supporting the case for Fed rate increases and potentially weighing on risk assets such as bitcoin. The weekend meeting between Iranian and US delegates in Pakistan holds 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 bitcoin's rally. The ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in US Treasury futures, has shown sharp spikes in the past, indicating rising uncertainty around inflation, interest rates, or macro shocks. A recent drop in the index suggests that the world's most important bond market is calm again, providing a green signal for crypto bulls.