Bitcoin's Upward Trend Confronts Inflation Concerns Backed by the Pentagon

Bitcoin's apparent momentum towards breaking through the $80,000 barrier has been hindered by the resurgence of macroeconomic uncertainty. A significant development arose from a classified Pentagon briefing to U.S. lawmakers, indicating that clearing mines in the Strait of Hormuz could take at least six months and will only commence after the resolution of the U.S.-Iran conflict. The briefing also cautioned that gasoline and oil prices might remain elevated until the midterm elections, as reported by the Washington Post. The persistence of high energy costs poses a risk of maintaining inflation, thereby limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging environment for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. The increase in essential costs, such as fuel and food, could also deter investors from allocating capital to 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 these concerns, U.S.-listed spot bitcoin ETFs continue to exhibit 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 advocate for caution, suggesting 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, albeit at a slower pace.' The market capitalization of USDT has reached a record high of $188.88 billion, while speculation in non-serious tokens is intensifying, with overcrowding in bullish bets. The ratio of bitcoin's price to gold has been steadily rising, 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.