Bitcoin's Uptrend Faces Setback Amid Inflation Concerns Backed by Pentagon Warning

As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty has reemerged as a significant obstacle. The Pentagon recently briefed U.S. lawmakers, warning that clearing mines in the Strait of Hormuz could take at least six months and that this process will only commence after the U.S.-Iran conflict has ended. This briefing, as reported by the Washington Post, also cautioned that gasoline and oil prices may remain high until the midterm elections, potentially keeping inflation elevated and limiting the Federal Reserve's ability to cut interest rates. This scenario presents a challenging 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 further deter investors from allocating capital to speculative assets. These risks are already manifesting in the markets, with WTI crude prices surging 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.' 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 are urging caution, noting 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 certain tokens is reaching extreme levels, with overcrowding in bullish bets. For more analysis on today's activity in altcoins and derivatives, see Crypto Markets Today, and for a comprehensive list of events this week, refer to CoinDesk's 'Crypto Week Ahead.' The chart illustrating fluctuations in the ratio between bitcoin's price and gold has shown a steady rise, topping the 100-day average, with the 50-day average potentially moving above the 100-day average, indicating a bullish crossover and suggesting continued outperformance of bitcoin relative to gold.