Lack of Conviction in Institutions' Bitcoin Positioning Amidst CPI and Iran Talks

The recent 7% surge in bitcoin's price to $74,685.12 has not been accompanied by strong conviction, with the recovery faltering near $72,000 due to impending binary risks such as Friday's US inflation report and US-Iran truce talks. Institutions are adopting a cautious approach, evident in the options market where they are purchasing calls to bet on gains 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 expected price rise above the current $40. Similarly, bitcoin options on Deribit have seen flows towards the $80,000 call. However, the demand for puts, which provide protection against declines, persists. The options skew, measuring the price differential between calls and puts, remains negative across all time frames, indicating a lingering bias for put options. The expected increase in the US consumer price index to over 3% may lead to market volatility, particularly if the core figure exceeds the estimated 2.7% annualized rate, potentially weighing on risk assets like BTC. The outcome of the US-Iran meeting in Pakistan will also impact financial market stability, with a positive outcome likely to accelerate BTC's rally. The ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in US Treasury futures, has shown a sharp spike in March but has since dropped, indicating a calmer bond market and a positive signal for crypto bulls.