Lack of Conviction in Institutions' Bitcoin Positioning May Be Influenced by CPI and Iran Talks

The recent 7% rally in bitcoin's price to $74,788.49 has not been accompanied by strong conviction, with the recovery faltering near $72,000 ahead of key events such as Friday's 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, there is demand for the $45 call expiring in May for BlackRock's spot bitcoin ETF, indicating an expected price rise above the current $40 level. Similarly, bitcoin options on Deribit have seen interest in the $80,000 call. However, the persistent demand for puts and the negative options skew across all time frames suggest a lingering bias towards 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. This could lead to market volatility, especially if the core figure exceeds the estimated 2.7% annualized rate, potentially supporting the case for Fed rate increases and impacting risk assets like bitcoin. The weekend meeting between Iranian and US delegates in Pakistan is also 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 shown a decrease in uncertainty around inflation and interest rates, indicating calmer conditions in the bond market and a green signal for crypto bulls.