Bitcoin's Uptrend Faces Inflation Warning from Pentagon

Bitcoin's apparent momentum towards breaking the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, could take a minimum of six months and will only commence after the resolution of the U.S.-Iran conflict. According to the Washington Post, the briefing also cautioned that gasoline and oil prices may remain elevated through the midterm elections, potentially keeping inflation high and limiting the Federal Reserve's ability to cut interest rates. This poses a negative backdrop for risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. The rising costs of essentials like fuel and food could also deter investors from allocating capital to speculative assets. These risks are reflected in markets, with WTI crude climbing to around $95 from $79 late last week, and government bond yields rising across major economies. The U.S. 10-year yield has increased by eight basis points to 4.32% this week, while its U.K. counterpart has risen 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 urge 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 reaching fever pitch, with overcrowding in bullish bets. The ratio between bitcoin's price and gold has been steadily rising, topping the 100-day average, with the 50-day average potentially moving above the 100-day average, confirming a bullish crossover.