Bitcoin's Uptrend Faces Inflation Warning from Pentagon

As bitcoin appeared poised to break through the $80,000 threshold, broader economic uncertainty has reemerged as an obstacle. A classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a crucial oil passage, may take at least six months and will only commence after the U.S.-Iran conflict is resolved. The same briefing warned that gasoline and oil prices may remain elevated until the midterm elections, according to reports from the Washington Post. The persistent rise in energy costs threatens to maintain high inflation, limiting the Federal Reserve's ability to cut interest rates. This creates a challenging environment for risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than actual economic activity. Additionally, increasing costs for essential items like fuel and food could reduce investors' willingness to invest in speculative assets. These risks are already impacting markets, with WTI crude rising to around $95 from $79 late last week, while government bond yields increase across major economies. The U.S. 10-year yield has risen by eight basis points to 4.32% this week, and its U.K. counterpart has risen 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 urge caution, arguing that the rally lacks broad support in the spot market. Julio Moreno, head of research at CryptoQuant, noted, '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. 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.' 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 the 100-day moving average, and the yellow line 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.