Bitcoin's Upward Trajectory Faces Inflation Warning from Pentagon

Bitcoin's apparent momentum towards breaking the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A classified briefing by the Pentagon to U.S. lawmakers revealed 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 is resolved. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, as reported by the Washington Post. This could lead to persistent inflation, limiting the Federal Reserve's ability to cut interest rates, which would negatively impact risk assets like bitcoin. Bitcoin is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Increasing costs of essentials such as fuel and food may 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%. 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.' U.S.-listed spot bitcoin ETFs continue to show sustained demand, with funds experiencing their fastest inflows in a month. 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, 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. Speculation in non-serious tokens is also reaching a fever pitch, with overcrowding in bullish bets. The ratio of bitcoin's price to gold has been steadily rising and has now surpassed the 100-day average, with the 50-day average potentially moving above the 100-day average, indicating a bullish shift in momentum.