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

As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty has resurfaced as a significant obstacle. A classified briefing by the Pentagon to US lawmakers revealed that clearing mines in the Strait of Hormuz, a critical oil chokepoint, could take a minimum of six months and will only commence after the US-Iran conflict has been resolved. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, according to a report by the Washington Post. Prolonged high energy costs could keep inflation high, limiting the Federal Reserve's ability to reduce interest rates, which would have a negative impact on risk assets like bitcoin. The cryptocurrency is particularly sensitive to interest rates and global liquidity conditions, rather than actual economic activity. Rising costs of essential items such as fuel and food could also discourage investors from allocating capital to speculative assets. These risks are already being reflected in the markets, with WTI crude prices surging to around $95 from $79 late last week, while government bond yields are increasing across major economies. The US 10-year yield has risen by eight basis points to 4.32% this week, and its UK 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 in tandem with yields and widening volatility spreads, indicating tighter financial conditions and increased market risks.' US-listed spot bitcoin ETFs continue to experience sustained demand, with funds seeing 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, noted that 'The recent Bitcoin price increase is entirely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, although at a slower pace. The same scenario played out 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. 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 the fluctuations in the ratio between bitcoin's price and gold, displayed in candlestick format, with the red line representing the 50-day moving average, the white line representing the 100-day moving average, and the yellow line representing the 200-day moving average. The ratio has been steadily rising and has now topped the 100-day average, with the 50-day average potentially moving above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum, indicating continued outperformance of bitcoin relative to gold.