Bitcoin's Upward Momentum Faces Challenge from Pentagon's Inflation Warning

Bitcoin's attempt to break through the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A classified briefing by the Pentagon to US lawmakers revealed that clearing mines in the Strait of Hormuz, a vital oil supply route, could take at least six months and will only commence after the US-Iran conflict is resolved. This has led to warnings of sustained high energy costs, which could keep inflation elevated and limit the Federal Reserve's ability to cut interest rates, creating a challenging environment for risk assets like bitcoin. The cryptocurrency's value is heavily influenced by interest rates and global liquidity, rather than real economic activity. Rising costs of essential items such as fuel and food may also deter investors from allocating capital to speculative assets. These risks are already manifesting in markets, with WTI crude prices surging to around $95 from $79 late last week, and government bond yields increasing across major economies. Despite sustained demand for US-listed spot bitcoin ETFs, some analysts are urging caution, citing the lack of broad-based support in the spot market. The recent price increase is attributed to demand in the perpetual futures market, 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, and speculation in non-serious tokens is intensifying, with overcrowding in bullish bets. A bullish crossover in the ratio of bitcoin's price to gold may indicate continued outperformance of bitcoin relative to gold.