Bitcoin's Upward Momentum Faces Inflation Warning from Pentagon

As bitcoin appeared poised to break through the $80,000 barrier after gaining momentum, macroeconomic uncertainty reemerged as an obstacle. A significant development came from the Pentagon, which informed US lawmakers in a classified briefing that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, may take at least six months and will only commence after the US-Iran conflict is resolved. The briefing also cautioned that gasoline and oil prices might remain elevated until the midterm elections, according to the Washington Post. Sustained high energy costs could lead to persistent inflation, limiting the Federal Reserve's ability to lower interest rates, which would negatively impact risk assets. Bitcoin, being highly sensitive to interest rates and global liquidity, rather than real economic activity, could be particularly affected. Rising costs of essential items like fuel and food could also 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 US 10-year yield has risen by eight basis points to 4.32%, while its UK counterpart has increased by 18 basis points to 4.96%. According to Michael Kramer, founder and CEO of Mott Capital Management, 'rising oil prices, yields, and volatility spreads signal tighter financial conditions and increased market risks.' Meanwhile, US-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, warned that 'the recent Bitcoin price increase is driven by demand in the perpetual futures market, while spot demand is still contracting, posing risks of a correction if traders start taking profits.' 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 reaching a fever pitch, with overcrowding in bullish bets.