As bitcoin appeared poised to break through the $80,000 threshold, uncertainty resurfaced due to a warning from the Pentagon regarding potential inflation. The Pentagon briefed US lawmakers, stating that clearing mines from the Strait of Hormuz, a vital oil passage, could take at least six months and will only commence after the US-Iran conflict is resolved. This briefing also cautioned that gasoline and oil prices may remain high until the midterm elections, according to the Washington Post.
Prolonged high energy costs could lead to persistent inflation, limiting the Federal Reserve's ability to lower interest rates, which would negatively impact risk assets like bitcoin. The cryptocurrency is particularly sensitive to interest rates and global liquidity rather than actual economic activity. Rising costs of essentials such as fuel and food might reduce investors' willingness to invest in speculative assets.
These risks are already evident in the market, with WTI crude rising to around $95 from $79 and government bond yields increasing across major economies. The US 10-year yield has risen by eight basis points to 4.32%, while its UK counterpart has increased by 18 basis points to 4.96%. According to Michael Kramer, founder and CEO of Mott Capital Management, 'Oil prices are rising alongside yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks.' Despite this, US-listed spot bitcoin ETFs continue to see sustained demand, with the fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode. However, some analysts advise caution, arguing that the rally lacks broad support in the spot market.
Julio Moreno, head of research at CryptoQuant, stated, 'The recent Bitcoin price increase is completely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting. There are risks of a correction if traders start taking profits while spot demand continues to contract.' The market capitalization of USDT, the largest dollar-pegged stablecoin, has reached a record high of $188.88 billion, while speculation in non-serious tokens is intensifying, with overcrowding in bullish bets.
The ratio between bitcoin's price and gold has been steadily rising, topping the 100-day average, with the 50-day average potentially moving above the 100-day average, indicating a bullish crossover.