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

Despite a 7% rally in bitcoin's price since Sunday, conviction remains weak due to key binary risks, including the upcoming U.S. inflation report and U.S.-Iran truce talks. Institutions are adopting a cautious approach, evident in the options market where they are buying calls to bet on gains while also purchasing puts for downside protection. According to QCP Capital, options tied to BlackRock's spot bitcoin ETF show demand for the $45 call expiring in May, indicating expectations of a price rise above the current level. However, demand for puts persists, revealing a lingering bias for downside protection. The U.S. consumer price index for March is expected to show a significant increase in annualized inflation, led by rising energy prices. This could lead to volatility if the core figure exceeds estimates, potentially weighing on risk assets like bitcoin. The meeting between Iranian and U.S. 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 U.S. Treasury futures, has shown sharp spikes in uncertainty around inflation and interest rates, but has recently dropped back to 74%, indicating a calm bond market and a positive signal for crypto bulls.