Institutions Lack Conviction in Bitcoin Positioning Amidst CPI and Iran Talks

The recent 7% surge in bitcoin's price to $77,135.88 has not been accompanied by strong conviction, with the recovery faltering near $72,000 due to impending binary risks, including the US inflation report and US-Iran truce talks. Institutions are adopting a cautious stance, as seen in the options market, where they are buying calls to bet on potential gains while also purchasing puts for downside protection. According to QCP Capital, options for BlackRock's spot bitcoin ETF show demand for the $45 call expiring in May, indicating expectations of a price increase. Similarly, bitcoin options on Deribit have seen significant demand for the $80,000 call. However, the persistent demand for puts, which offer protection against declines, is also evident in options skew, which remains negative across all time frames. The upcoming US consumer price index (CPI) 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 meeting between Iranian and US delegates in Pakistan over the weekend will also be crucial in determining 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 (MOVE) has shown a decrease in volatility in US Treasury futures, indicating calmer conditions in the global finance and collateral and credit creation, which could be a positive signal for crypto bulls.