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

The recent 7% surge in bitcoin's price to $76,150.70 has not been accompanied by strong conviction, with the recovery faltering near $72,000 due to upcoming 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 pursuing upside potential via calls while also buying downside protection. According to QCP Capital, options linked to BlackRock's spot bitcoin ETF show demand for the $45 call expiring in May, indicating an expected 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, is also notable. The options skew, which measures the price differential between calls and puts, remains negative across all time frames, indicating a lingering bias towards put options. The upcoming US consumer price index for March is expected to show a marked increase in annualized inflation, primarily driven by rising energy prices. This may 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 BTC. The weekend meeting between Iranian and US delegates in Pakistan may also impact financial market stability, with a potential resolution to the war and normalization of oil tanker traffic through the Strait of Hormuz 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 sharp spikes in recent months, indicating rising uncertainty around inflation, interest rates, and macro shocks. However, the index has recently dropped back to 74%, suggesting a return to calmness in the global finance and collateral and credit creation, which may be a positive signal for crypto bulls.