Bitcoin's Upward Trend Faces Challenge from Pentagon's Inflation Warning

As bitcoin appeared poised to break through the $80,000 threshold, broader economic uncertainty has reemerged as an obstacle. The Pentagon recently informed US lawmakers in a classified briefing that mine clearance operations in the Strait of Hormuz, a crucial oil supply route, 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 could remain elevated until the midterm elections, according to a report by the Washington Post. The persistence of high energy costs threatens to keep inflation high, limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging environment for risk assets, particularly bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than actual economic activity. Additionally, rising costs for essential items like fuel and food may lead investors to reduce their allocation to speculative assets. These risks are already manifesting in the markets, with WTI crude prices increasing to around $95 from $79 last week, and government bond yields rising across major economies. The US 10-year yield has risen by eight basis points to 4.32% this week, 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, alongside increasing yields and widening volatility spreads, signal tighter financial conditions and heightened market risks.' Despite these challenges, US-listed spot bitcoin ETFs continue to exhibit 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 are advising caution, arguing that the current rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, noted that 'The recent Bitcoin price increase is driven solely by demand in the perpetual futures market, while spot demand is still contracting, albeit at a slower pace. This same scenario occurred in January when Bitcoin peaked at $98K, and there is a risk of 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. Meanwhile, speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For further 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.' Today's signal is indicated by the ratio between bitcoin's price and gold, displayed in a candlestick chart. The red line represents the 50-day moving average, the white line the 100-day moving average, and the yellow line the 200-day moving average. The ratio has been steadily rising and has now surpassed the 100-day average. More importantly, the 50-day average is poised to move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum and potential continued outperformance of bitcoin relative to gold.