Lack of Conviction in Institutions' Bitcoin Positioning May Be Alleviated by CPI and Iran Talks

The recent 7% surge in bitcoin's price to $74,607.74 has not been accompanied by strong conviction, with the recovery faltering near $72,000 due to impending binary risks such as the US inflation report and US-Iran truce talks. Institutions are adopting a cautious approach, as seen in the options market where they are chasing upside through calls while also purchasing downside protection. Demand for the $45 call expiring in May has been observed in options tied to BlackRock's spot bitcoin ETF, indicating expectations of a price increase above the current $40. Similarly, the $80,000 call has emerged as a popular bet on Deribit. However, the demand for puts, which provide protection against declines, persists, as reflected in the negative options skew across all time frames. The US consumer price index for March is expected to show a significant increase in annualized inflation, primarily driven by rising energy prices. This may lead to market volatility, particularly if the core figure exceeds the estimated 2.7% annualized rate, potentially resulting in further Federal Reserve rate increases and negatively impacting 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 a decrease in turbulence, indicating calmer conditions in the bond market and a positive signal for crypto bulls.