Institutions Lack Conviction in Bitcoin, Awaiting CPI and Iran Talks

The recent 7% surge in bitcoin's price to $74,334.19 has not been accompanied by strong conviction, as the recovery has stalled near $72,000 due to key binary risks such as the upcoming U.S. inflation report and U.S.-Iran truce talks. Institutions are adopting a cautious stance, as evidenced by their options market activities, 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 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 and the negative options skew across all time frames suggest a lingering bias towards put options. The U.S. 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, particularly if the core figure exceeds the estimated 2.7% annualized rate, potentially cementing the case for Fed rate increases and weighing on risk assets like bitcoin. The outcome of the U.S.-Iran talks in Pakistan will also be crucial for 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, which reflects volatility in U.S. Treasury futures, has shown a decrease in uncertainty around inflation and interest rates, indicating a calmer bond market and a positive signal for crypto bulls.