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

The recent 7% surge in bitcoin's price to $74,284.22 has not been accompanied by strong conviction, with the recovery faltering near $72,000 ahead of key events such as Friday's US inflation report and US-Iran truce talks. Institutions are adopting a cautious stance, as seen in the options market where they are pursuing upside potential through calls while also buying protection against declines. According to QCP Capital, options for BlackRock's spot bitcoin ETF show demand for the $45 call expiring in May, indicating expectations of a price rise above the current $40 level. Similarly, bitcoin options on Deribit have seen significant interest in the $80,000 call. However, the persistent demand for puts, which offer protection against price drops, suggests a lingering bias towards caution. 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 upcoming meeting between Iranian and US 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 US Treasury futures, has shown sharp spikes in the past, indicating rising uncertainty around inflation, interest rates, or macro shocks. The recent drop in the index to 74% suggests a return to calm in the bond market, which could be a positive signal for crypto bulls.