Lack of Conviction in Institutions' Bitcoin Positioning May be Addressed by CPI and Iran Talks

Despite bitcoin's price surge of almost 7% since Sunday to $75,275.92, conviction in the market remains weak, with the recovery stalling near $72,000 ahead of key 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 continue to pursue upside gains via calls while also buying downside protection. Demand for calls tied to BlackRock's spot bitcoin ETF show expectations of a price rise above $45 by May, and similar flows are seen in Deribit's bitcoin options with the $80,000 call being the most popular bet. However, the demand for puts, offering protection against declines, persists and is reflected in the negative options skew across all time frames, indicating a lingering bias 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 due to the Iran war. Markets may experience volatility if the core figure exceeds the estimated 2.7% annualized rate, potentially leading to further Fed rate increases and negatively impacting risk assets like BTC. The meeting between Iranian and US delegates in Pakistan over the weekend will be crucial for financial market stability, and a positive outcome could 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 indicating rising uncertainty around inflation, interest rates, or macro shocks, but has recently dropped back to 74% after rising to 115% in March, signaling a calm in the world's most important bond market and a positive sign for crypto bulls.