Bitcoin's Upward Trend Faces Challenge from Pentagon's Inflation Warning

As bitcoin appeared to gain momentum towards breaking through the $80,000 mark, macroeconomic uncertainty has resurfaced as a significant obstacle. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a critical oil chokepoint, could take at least six months and will only commence after 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. Prolonged high energy costs could keep inflation high, limiting the Federal Reserve's ability to cut interest rates, which would negatively impact risk assets. Bitcoin, being highly sensitive to interest rates and global liquidity, may be particularly affected. Furthermore, rising costs of essentials like fuel and food could reduce investors' willingness to invest in speculative assets. These risks are already manifesting in markets, with WTI crude rising to around $95 from $79 and government bond yields increasing across major economies. The U.S. 10-year yield has risen by eight basis points to 4.32%, and its U.K. 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, U.S.-listed spot bitcoin ETFs continue to show 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 are urging caution, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, noted that '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. Additionally, speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For more analysis of today's activity in altcoins and derivatives, see Crypto Markets Today, and for a comprehensive list of events this week, see CoinDesk's 'Crypto Week Ahead.' The chart showing fluctuations in the ratio between bitcoin's price and gold has been steadily rising and has now topped the 100-day average, with the 50-day average potentially moving above the 100-day average, indicating a bullish crossover and suggesting continued outperformance of bitcoin relative to gold.