Bitcoin's Uptrend Faces Inflation Warning from Pentagon

Bitcoin's apparent momentum towards breaking through the $80,000 barrier has been countered by renewed macroeconomic uncertainty. A significant development emerged from the Pentagon, which informed US lawmakers in a classified briefing that clearing mines in the crucial oil passage, the Strait of Hormuz, could take a minimum of six months and will only commence after the US-Iran conflict concludes. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, as reported by the Washington Post. The persistent high energy costs pose a risk of keeping inflation elevated, thereby limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging backdrop for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. The rising costs of essential items like fuel and food could also deter investors from allocating capital to speculative assets. These risks are already manifesting in the markets, with WTI crude rising to around $95 from $79 late last week, and government bond yields increasing 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, 'Oil prices are increasing alongside yields and widening volatility spreads, signaling tighter financial conditions and heightened market risks.' 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 rally lacks broad-based support in the spot market. CryptoQuant's head of research, Julio Moreno, stated on X, 'The recent Bitcoin price increase is entirely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, although at a slower pace. The same scenario occurred 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. Meanwhile, speculation in non-serious tokens is 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.' Today's signal is indicated by the chart showing fluctuations in the ratio between bitcoin's price and gold, displayed in candlestick format. 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 topped the 100-day average. More importantly, the 50-day average could soon move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum.