Lack of Conviction in Institutional Bitcoin Investments; CPI and Iran Talks May Provide Clarity

The price of bitcoin, currently at $74,284.15, has seen a 7% increase since Sunday, yet conviction in the market remains weak due to 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 strategy, evident in the options market where they are pursuing upside potential through call options while also buying downside protection. According to QCP Capital, there is demand for the $45 call expiring in May for BlackRock's spot bitcoin ETF, indicating an expectation of the price rising 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 declines, suggests a lingering bias towards caution. The options skew, measuring the price difference between calls and puts, remains negative across all time frames, further indicating this bias. The upcoming US consumer price index for March is expected to show a significant increase in annualized inflation, primarily driven by rising energy prices due to the Iran war. This could lead to market volatility, especially if the core figure exceeds the estimated 2.7% annualized increase, potentially supporting the case for further Fed rate increases and negatively impacting risk assets like bitcoin. The meeting between Iranian and US delegates in Pakistan over the weekend could be pivotal for financial market stability, with a positive outcome potentially accelerating bitcoin's rally. The first indicators of this could be seen in Hyperliquid-listed oil perpetual futures. Beyond these immediate factors, the ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in US Treasury futures, has shown sharp spikes indicating rising uncertainty around inflation, interest rates, or macro shocks. Recently, the index rose to 115% from 73% in March before dropping back to 74% this month, signaling a return to calm in the world's most important bond market and potentially a positive signal for crypto markets.