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

Despite bitcoin's recent 7% price surge to $73,922.42, conviction remains elusive, with the recovery faltering near $72,000 ahead of key risk events, including the US inflation report and US-Iran talks. Institutions are adopting a cautious stance, as seen in the options market, where they are pursuing upside potential through calls while 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, demand for puts, which offer protection against declines, persists, as reflected in the negative options skew across all time frames. The upcoming US consumer price index is expected to show an increase in annualized inflation, primarily driven by rising energy prices, which may lead to market volatility if the core figure exceeds estimates. The meeting between Iranian and US delegates may also impact financial market stability, with a potential resolution to the conflict 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 decline in uncertainty around inflation and interest rates, potentially signaling a positive outlook for crypto markets.