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

Despite bitcoin's recent 7% price surge to $77,547.81, market conviction remains weak, with 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 approach, buying call options to bet on potential gains while also purchasing 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 $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 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 supporting the case for Fed rate increases and weighing on 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 sharp spikes in recent months, indicating rising uncertainty around inflation, interest rates, and macro shocks. However, the index has dropped back to 74% this month, signaling a calm in the world's most important bond market and a positive sign for crypto bulls.