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

As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty resurfaced as a significant obstacle. A classified briefing by the Pentagon to U.S. lawmakers revealed that clearing mines in the Strait of Hormuz, a crucial oil passage, could take at least six months and would only commence after the U.S.-Iran conflict is resolved. According to the Washington Post, the briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, potentially keeping inflation high and limiting the Federal Reserve's ability to reduce interest rates. This scenario presents a challenging backdrop for risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs for 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 rising to around $95 from $79 late last week, and government bond yields increasing across major economies. The U.S. 10-year yield has risen by eight basis points to 4.32% this week, while its U.K. counterpart has increased 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." Despite these concerns, 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 advising 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, while speculation in non-serious tokens is intensifying, with overcrowding in bullish bets. For a deeper 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 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 is poised to 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.