Bitcoin's Uptrend Faces Challenge from Pentagon Warning on Inflation

As bitcoin appeared poised to break through the $80,000 threshold, broader economic uncertainty has reemerged to hinder its progress. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a critical oil passage, may take at least six months and will only commence after the U.S.-Iran conflict is resolved. The briefing also cautioned that elevated gasoline and oil prices could persist through the midterm elections, as reported by the Washington Post. This could lead to sticky inflation, limiting the Federal Reserve's ability to reduce interest rates, which would negatively impact risk assets like bitcoin. Bitcoin's value is particularly sensitive to interest rates and global liquidity, rather than actual economic activity. Furthermore, rising costs for essentials could reduce investor appetite for speculative assets. These risks are already manifesting in markets, with WTI crude prices surging to around $95 from $79 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.' Despite these challenges, U.S.-listed spot bitcoin ETFs continue to see 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 advise caution, noting that the rally lacks broad support in the spot market. Julio Moreno, head of research at CryptoQuant, cautioned 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. For further 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 the fluctuations in the ratio between bitcoin's price and gold, with the ratio steadily rising and topping the 100-day average. If the 50-day average moves above the 100-day average, it could confirm a bullish crossover, suggesting a bullish shift in momentum and continued outperformance of bitcoin relative to gold.