Bitcoin's Upward Trajectory Hits a Roadblock with Pentagon's Inflation Warning

As bitcoin appeared to gain momentum to break through the $80,000 barrier, macroeconomic uncertainty has reemerged as a significant obstacle. The most notable development came from a classified Pentagon briefing to U.S. lawmakers, which stated that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, could take at least six months and will only commence after the U.S.-Iran conflict ends. According to the Washington Post, the briefing also warned that gasoline and oil prices may remain elevated until the midterm elections. Persistently 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 conditions rather than real economic activity, is particularly vulnerable. Rising costs for essential items like fuel and food could also reduce investors' willingness to invest in speculative assets. These risks are already evident in the markets, with WTI crude rising to around $95 from $79 last week and government bond yields increasing across major economies. The U.S. 10-year yield has increased by eight basis points to 4.32% this week, while its U.K. counterpart has risen by 18 basis points to 4.96%. Michael Kramer, founder and CEO of Mott Capital Management, noted that 'oil prices are rising alongside yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks.' U.S.-listed spot bitcoin ETFs continue to show 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 urging caution, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, warned 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. Meanwhile, speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For 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 chart shows fluctuations in the ratio between bitcoin's price and gold, with the ratio steadily rising and topping the 100-day average. The 50-day average could soon move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum and continued outperformance of bitcoin relative to gold.