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

Despite a 7% rally in bitcoin's price since Sunday to $74,120.23, conviction remains weak due to the recovery stalling near $72,000 ahead of key binary risks, including Friday's U.S. inflation report and U.S.-Iran truce talks. Institutions are taking a cautious stance, chasing upside via calls while buying downside protection. Demand for calls is evident, with options tied to BlackRock's spot bitcoin ETF showing a desire for the $45 call expiring in May, and the $80,000 call emerging as the most popular bet on Deribit. However, the persistent demand for puts, which offer downside protection, and a negative options skew across all time frames, indicate a lingering bias for put options. The U.S. consumer price index for March is expected to show a marked increase in annualized inflation, primarily driven by rising energy prices. This could lead to volatility if the core figure exceeds the annualized 2.7% estimate, further solidifying the case for Fed rate increases and potentially weighing on risk assets such as BTC. The weekend meeting between Iranian and U.S. delegates in Pakistan may hold 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 BTC's rally. The ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in U.S. Treasury futures, has dropped back to 74% this month after rising to 115% in March, indicating that the world's most important bond market is calm again, a positive signal for crypto bulls.