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

The recent 7% surge in bitcoin's price to $75,191.52 has not been accompanied by strong conviction, with the recovery faltering near $72,000 ahead of key events such as Friday's US inflation report and US-Iran truce talks. Institutions are adopting a cautious stance, as evident in the options market, where they are purchasing calls to bet on potential gains while also buying puts for downside protection. According to QCP Capital, there is demand for the $45 call expiring in May for BlackRock's spot bitcoin ETF, indicating expectations of a price rise above the current $40. 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, which measures the price differential between calls and puts, remains negative across all time frames, indicating a preference for put options. The upcoming US consumer price index for March is expected to show a significant increase in annualized inflation, primarily driven by rising energy prices. This could lead to market volatility, particularly if the core figure exceeds the estimated 2.7% annualized rate, potentially paving the way for further Fed rate increases and weighing on risk assets like bitcoin. The meeting between Iranian and US delegates in Pakistan over the weekend will also be closely watched, as a potential end to the war and normalization of oil tanker traffic through the Strait of Hormuz could accelerate bitcoin's rally. The first signs of this could emerge from Hyperliquid-listed oil perpetual futures. Additionally, 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 indicating calmer financial conditions and a more favorable environment for crypto markets.