Bitcoin is entering one of its most dramatic weeks of trading since February’s correction, with tensions in the Middle East pushing oil prices higher, inflation expectations hardening and options traders positioning themselves for a possible break above $85,000.
According to Crypto Slates According to data, the largest digital asset fell on Sunday shortly after President Donald Trump rejected Iran’s latest response to a US peace proposal, then recovered above $82,000 before falling almost $81,034 at the time of writing.
The move kept Bitcoin within the narrow range that has defined trading in recent weeks, even as geopolitical risks continued to impact energy markets and interest rate expectations.
Particularly Trump called Iran’s counter-offer was “TOTALLY UNACCEPTABLE” after Tehran requested reparations, release of blocked financial assets and recognition of its sovereignty over the Strait of Hormuz.
The waterway has become the main conduit through which the US-Iran conflict reaches global markets, given the role it plays in the movement of oil and liquefied natural gas.
That ongoing market tension has created a difficult situation for Bitcoin, as a prolonged oil shock could keep inflation high, delay Federal Reserve rate cuts and put pressure on speculative assets.
Yet Bitcoin still commands close to $80,000, while options data, fund flows and Washington’s crypto calendar suggest traders may be underestimating the risk of upside.
The oil shock puts inflation center stage again
The immediate test comes Tuesday, when the Bureau of Labor Statistics releases April Consumer Price Index data.
Markets are bracing for a renewed acceleration in headline inflation following the surge in global oil prices. Economists expect the CPI to rise 0.6% from March and 3.7% from a year earlier, compared to 3.3% in March. The core CPI, which excludes food and energy, is expected to remain near 2.7% year-over-year.
March already showed the pressure of higher energy prices. The CPI rose at the fastest annual pace of the year, with the energy component rising as gasoline prices rose.
That has made the April report an immediate test of whether the oil shock remains contained to headline inflation or begins to filter through to broader goods and services prices.
David Auerbach, head of investments at Hoya Capital, said The coming data could set expectations for the Fed’s policy trajectory, with CPI on Tuesday, followed by producer prices on Wednesday, retail sales on Thursday and unemployment claims later in the week.
He said the headline CPI is expected to show a notable reacceleration linked to oil, while the core CPI will be watched for signs that energy costs are shifting to broader categories.
The prediction markets tend toward the same view of persistent inflation. Polymarket traders assigned a 100% probability of inflation rising above 3% in 2026 and a 94% probability of it rising above 3.5%, while Kalshi prices showed April CPI above 3.2% annualized.
Polymarket traders also showed a 55.6% probability that the Fed will make no rate cuts in 2026, while traders assigned a 95.5% probability of the June Federal Open Market Committee (FOMC) meeting ending with rates unchanged.
The counterpoint, however, comes from real-time inflation gauges. Truflation American inflation index has returned nearly 2% year over year, with a methodology designed to track price changes on a daily basis rather than through the delayed monthly process used in official CPI data.
This softer reading has given crypto bulls the argument that pressure on goods, food and gasoline is already cooling beneath the surface, even as official inflation forecasts rise due to the oil shock.
For Bitcoin, the distinction is crucial. A sharp CPI print would reinforce expectations that the Fed will remain on hold, potentially dragging Bitcoin back to $80,000 and then the $78,000 support zone.
However, a cooler push would weaken the trade on persistent inflation, boost risk appetite and reopen the path to the $85,000 zone being watched by traders.
Washington Gives Bitcoin Bulls a Catalyst
The political calendar adds another source of potential volatility for BTC this week.
The Senate Banking Committee is expected to consider the CLARITY Act on May 14, which would propose a long-awaited crypto market structure bill that would determine when digital tokens fall under securities or commodity rules.
The bill has become a point of interest for crypto companies, banks and investors seeking a clearer U.S. regulatory framework.
A compromise negotiated by Sen. Thom Tillis and Sen. Angela Alsobrooks would ban customer rewards on inactive stablecoin holdings, which banks argue are akin to deposit interest, while allowing rewards tied to active stablecoin usage, such as payments.
That language has left banking groups and crypto proponents embroiled in a late-stage pre-markup dispute.
For Bitcoin traders, the May 14 vote is less about a single stablecoin provision than about the signal sent about whether Congress can get a crypto bill through a divided Senate.
A relaxed increase would strengthen the argument that U.S. digital asset rules are moving toward legislation after years of enforcement-induced uncertainty. However, a postponement or a split vote would take away one of the week’s potential upside catalysts.
The Fed calendar is also central. Senate Republicans have made Kevin Warsh’s confirmation a priority, with the process unfolding as Jerome Powell’s term nears its end, according to Roll Call.
The leadership transition comes at the same time as the CPI report, leaving little room for markets to separate inflation data from expectations for the central bank’s next phase.
The options book leaves room for a higher break
The macro risk is colliding with a market structure that is starting to deviate from the heavy defensive positioning of earlier this year.
In a note shared with CryptoSlatesaid crypto research firm 10x Research:
“Kevin Warsh’s Senate vote on Monday, May 11 and the expected progress of the CLARITY Act on Thursday, May 14 are exactly the kind of macro and regulatory catalysts that force defensive positioning to relax. Institutions that placed put hedges during the January-April pullback have no incentive to keep them in a confirmed Fed leadership transition and legislative crypto clarity.”
According to the company, Bitcoin traders remain too complacent about the effect of expiring put positions, even as demand for upside calls has increased.
Since mid-January, Bitcoin’s total gamma exposure has been deeply negative, reaching roughly -$3.2 billion around $82,000, according to the company’s analysis.
Negative gammas force dealers to hedge against the market. When Bitcoin rises, dealers buy to maintain their hedges. When it falls, they sell. That dynamic can intensify both rallies and selloffs, especially when a directional catalyst arrives.
10x Research stated that the same structure has kept Bitcoin in a narrow band in recent weeks.
According to the company, BTC’s rallies have been cushioned by covered call sales from yield-oriented holders, while the troughs have been cushioned by put hedges.
The result was a market that moves wildly during the day but repeatedly returns to the $78,000 to $82,000 range.
However, that balance could change as the May 29 and June 26 due dates approach. The May expiration carries significant short-term open interest, while June 26 is the largest expiration in the structure, with approximately $12 billion in notional exposure and call and put positions close to balance.
If these positions expire without being replaced, the hedging pressure that has limited Bitcoin’s price could fade.
Considering the above, the levels are simple. BTC holding above $80,000 until the May 29 expiration would reduce short-term overhang.
However, a move through $85,000 would take Bitcoin above the gamma flip level identified by 10x Research, changing dealer positioning in a way that could make rallies less limited and force defensively positioned traders to chase upside.