Bitcoin's Upward Trajectory Hits a Snag with Pentagon Warning on Inflation

As bitcoin appeared poised to break through the $80,000 barrier, macroeconomic uncertainty has resurfaced. A recent classified briefing by the Pentagon to U.S. lawmakers warned that clearing mines in the Strait of Hormuz could take at least six months and may not begin until the U.S.-Iran conflict is resolved. This warning, as reported by the Washington Post, also indicated that gasoline and oil prices may remain high until the midterm elections, potentially keeping inflation elevated and limiting the Federal Reserve's ability to cut interest rates. This scenario presents a challenging backdrop for risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs for essentials could reduce investors' appetite for speculative assets. Markets are already reflecting these risks, with WTI crude rising to around $95 from $79 and government bond yields increasing across major economies. The U.S. 10-year yield has risen by eight basis points to 4.32%, 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 warnings, U.S.-listed spot bitcoin ETFs are seeing sustained demand, with the fastest inflows in a month. However, some analysts caution that the rally lacks broad support in the spot market. Julio Moreno, head of research at CryptoQuant, noted that the recent price increase is driven by demand in the perpetual futures market, while spot demand is still contracting, posing risks of a correction. The market capitalization of USDT has hit a record high, and speculation in certain tokens is reaching a fever pitch, with overcrowding in bullish bets. The ratio of bitcoin's price to gold has been rising, with the 50-day average potentially crossing above the 100-day average, suggesting a bullish shift in momentum.