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

Although bitcoin's price has surged nearly 7% since Sunday to $75,578.62, conviction in the market remains weak, with the recovery stalling near $72,000 ahead of significant binary risks, including the upcoming US inflation report and US-Iran truce talks. Institutions are adopting a cautious approach, as seen in the options market, where they are buying calls to bet on potential gains while also seeking downside protection through puts. 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 level. Similarly, bitcoin options on Deribit have seen significant interest in the $80,000 call. However, the demand for puts persists, revealing a lingering bias for downside protection. 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, especially if the core figure exceeds the estimated 2.7% annualized rate, potentially supporting the case for further Fed rate increases and weighing on risk assets like bitcoin. 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 bitcoin's rally. The ICE BofA US Bond Market Option Volatility Estimate Index, which reflects volatility in US Treasury futures, has recently shown a decrease in uncertainty around inflation and interest rates, indicating calmer conditions in the global finance market and a positive signal for crypto bulls.