Bitcoin's apparent momentum towards a breakout above $80,000 has been hindered by renewed macroeconomic uncertainty. A classified Pentagon briefing to US lawmakers highlighted the potential for prolonged elevated oil prices due to the challenges of clearing mines in the Strait of Hormuz, a critical oil supply route. This warning, as reported by the Washington Post, suggests that gasoline and oil prices may remain high through the midterm elections, potentially keeping inflation elevated and limiting the Federal Reserve's ability to lower interest rates.
The impact of persistent high energy costs on inflation could negatively affect risk assets, including bitcoin, which is particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. Moreover, rising essential costs could deter investors from allocating capital to speculative assets like bitcoin. These concerns are reflected in market trends, with WTI crude oil prices surging to around $95 from $79 late last week, and government bond yields increasing across major economies. For instance, the US 10-year yield has risen by eight basis points to 4.32% this week, 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 these headwinds, US-listed spot bitcoin ETFs continue to attract demand, with the fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode. However, some analysts caution that the rally lacks broad support in the spot market.
Julio Moreno, head of research at CryptoQuant, noted, 'The recent Bitcoin price increase is completely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting (although at a slower pace). The same happened in January, when Bitcoin peaked at $98K.
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 certain tokens is intensifying. For deeper analysis of today's altcoin and derivatives activity, see Crypto Markets Today, and for a comprehensive list of this week's events, refer to CoinDesk's 'Crypto Week Ahead.' A key trend to watch is the fluctuation in the ratio between bitcoin's price and gold, which has been steadily rising and has now surpassed the 100-day average, with the 50-day average potentially moving above the 100-day average soon, indicating a bullish crossover that suggests bitcoin's continued outperformance relative to gold.