Bitcoin's Uptrend Faces Inflation Warning from Pentagon

Bitcoin's apparent momentum towards breaking the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A classified Pentagon briefing to US lawmakers revealed that clearing mines from 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, as reported by the Washington Post, also cautioned that gasoline and oil prices may remain elevated until the midterm elections, potentially keeping inflation high and limiting the Federal Reserve's ability to reduce interest rates. This could have a negative impact on risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions. Rising costs for essential items like fuel and food could also deter investors from allocating capital to speculative assets. These risks are already affecting markets, with WTI crude rising to around $95 from $79 and government bond yields increasing across major economies. The US 10-year yield has risen by eight basis points to 4.32%, 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 rising alongside yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks.' Despite this, US-listed spot bitcoin ETFs continue to show 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, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, noted 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 non-serious tokens is reaching a fever pitch. For more analysis, see Crypto Markets Today and CoinDesk's Crypto Week Ahead.