Bitcoin's Uptrend Faces Challenge from Pentagon's Inflation Warning

As bitcoin seemed poised to break through the $80,000 barrier, macroeconomic uncertainty has reemerged as a significant obstacle. A recent classified briefing by the Pentagon to US lawmakers revealed that clearing mines in the Strait of Hormuz, a critical oil chokepoint, could take a minimum of six months and will only commence after the US-Iran conflict has ended. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, according to the Washington Post. Prolonged high energy costs may lead to sticky inflation, limiting the Federal Reserve's ability to cut interest rates, which would have a negative impact on risk assets. Bitcoin, being highly sensitive to interest rates and global liquidity conditions, may be particularly affected. Rising costs of essential items like fuel and food could also deter investors from allocating capital to speculative assets. These risks are already manifesting in markets, with WTI crude climbing to around $95 from $79 and government bond yields rising across major economies. The US 10-year yield has increased by eight basis points to 4.32%, while its UK counterpart has risen by 18 basis points to 4.96%. 'Oil prices are rising alongside yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks,' said Michael Kramer, founder and CEO of Mott Capital Management. Despite this, US-listed spot bitcoin ETFs continue to show sustained demand, with funds experiencing their fastest inflows in a month. However, some analysts are urging caution, arguing that the rally lacks broad-based support in the spot market. '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,' said Julio Moreno, head of research at CryptoQuant. 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 reaching a fever pitch. For more analysis, see Crypto Markets Today and CoinDesk's Crypto Week Ahead.