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

Despite bitcoin's recent 7% price surge to $77,897.50, market conviction remains weak, with the recovery faltering near $72,000 ahead of key risk events, including the upcoming US inflation report and US-Iran truce talks. Institutions are adopting a cautious approach, evident in the options market where they are pursuing upside potential through call options while buying 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 increase 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 US consumer price index for March is expected to show a notable 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 supporting the case for Fed rate increases and negatively impacting risk assets like bitcoin. The outcome of the US-Iran meeting in Pakistan will also be crucial for financial market stability, with a potential end to the war and normalization of oil 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 uncertainty after a spike in March, indicating calmer conditions in the bond market and a positive signal for crypto bulls.