Bitcoin's Uptrend Faces Setback as Pentagon Warns of Prolonged Inflation

Bitcoin's potential surge above $80,000 has been hindered by renewed macroeconomic uncertainty. A recent classified briefing by the Pentagon to U.S. lawmakers revealed that clearing mines in the Strait of Hormuz could take a minimum of six months, and this process will only commence once the U.S.-Iran conflict is resolved. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, as reported by the Washington Post. The persistent nature of high energy costs poses a risk of inflation becoming sticky, thereby limiting the Federal Reserve's ability to cut interest rates. This creates a negative environment for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. The rising costs of essential items like fuel and food could also lead to a decrease in investors' willingness to allocate capital to speculative assets. These risks are already manifesting in the markets, with WTI crude climbing to approximately $95 from $79 in the latter part of last week. Government bond yields are also on the rise across major economies, with the U.S. 10-year yield increasing by eight basis points to 4.32% this week, and its U.K. counterpart rising 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 challenges, U.S.-listed spot bitcoin ETFs continue to exhibit sustained demand, with funds experiencing their fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode. However, some analysts are advising caution, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, stated on X, '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 occurred 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. Meanwhile, speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For a more in-depth analysis of today's activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk's 'Crypto Week Ahead.' The current trend Today's signal The chart displays the fluctuations in the ratio between bitcoin's price and gold in candlestick format. The red line represents the 50-day moving average, the white line the 100-day moving average, and the yellow line the 200-day moving average. The ratio has been steadily rising and has now surpassed the 100-day average. More importantly, the 50-day average could soon move above the 100-day average, confirming a bullish crossover. This suggests a bullish shift in momentum, indicating continued outperformance of bitcoin relative to gold.