As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty has reemerged as a significant obstacle. A recent classified briefing by the Pentagon to U.S.
lawmakers highlighted the potential for prolonged high energy costs due to the time it may take to clear mines in the Strait of Hormuz, a crucial oil passage, which could take at least six months and will only commence after the resolution of the U.S.-Iran conflict. Additionally, the briefing warned of potentially elevated gasoline and oil prices leading up to the midterm elections, as reported by the Washington Post. The persistent nature of high energy costs poses a risk of sticky inflation, limiting the Federal Reserve's ability to cut interest rates.
This scenario presents a challenging backdrop for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. The increase in essential costs, such as fuel and food, could also deter investors from allocating capital to speculative assets. These risks are manifesting in the markets, with WTI crude climbing to around $95 from $79 late last week, and government bond yields increasing across major economies. The U.S.
10-year yield has risen by eight basis points to 4.32% this week, while its U.K. 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 these challenges, U.S.-listed spot bitcoin ETFs continue to experience 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 advising caution, suggesting that the rally lacks broad-based support in the spot market.
Julio Moreno, head of research at CryptoQuant, 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.' The market capitalization of USDT, the largest dollar-pegged stablecoin, has reached a record high of $188.88 billion, while speculation in certain tokens is reaching a fever pitch, with overcrowding in bullish bets. The ratio between bitcoin's price and gold has been steadily rising, topping the 100-day average, with the potential for the 50-day average to move above the 100-day average, indicating a bullish crossover and suggesting continued outperformance of bitcoin relative to gold.