As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty resurfaced. The Pentagon warned lawmakers that clearing mines in the Strait of Hormuz could take at least six months, and this process will only commence after the U.S.-Iran conflict is resolved. This warning also included the possibility of sustained high gasoline and oil prices through the midterm elections, as reported by the Washington Post. Prolonged high energy costs may lead to sticky inflation, limiting the Federal Reserve's ability to reduce interest rates, which could negatively impact risk assets.
Bitcoin is particularly sensitive to interest rates and global liquidity conditions, rather than actual economic activity. Rising costs for essential items like fuel and food could also decrease investors' willingness to invest in speculative assets. These risks are already manifesting in the markets, with WTI crude climbing to around $95 from $79 late last week.
Government bond yields are also increasing across major economies, with the U.S. 10-year yield rising by eight basis points to 4.32% this week and its U.K. counterpart increasing 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.' 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 are advising caution, stating that the rally lacks broad-based support in the spot market. CryptoQuant's head of research, Julio Moreno, 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. This is similar to what 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 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 displays the fluctuations in the ratio between bitcoin's price and gold.
The ratio has been steadily rising and has now topped the 100-day average. If the 50-day average moves above the 100-day average, it could confirm a bullish crossover, indicating a bullish shift in momentum and continued outperformance of bitcoin relative to gold.