Bitcoin's Advance Hits a Roadblock Amid Inflation Concerns Backed by the Pentagon

As bitcoin appeared poised to break through the $80,000 mark, macroeconomic uncertainty has resurfaced as a significant obstacle. A critical development emerged from the Pentagon, which informed U.S. lawmakers in a classified briefing that demining the Strait of Hormuz, a crucial oil chokepoint, may take a minimum of six months and will only commence after the resolution of the U.S.-Iran conflict. According to the Washington Post, the briefing also cautioned that gasoline and oil prices might remain elevated until the midterm elections. Persistently high energy costs could lead to sticky inflation, limiting the Federal Reserve's ability to reduce interest rates, which would create a challenging environment for risk assets. Bitcoin, being highly sensitive to interest rates and global liquidity conditions rather than real economic activity, is particularly vulnerable. Additionally, rising costs for essential items like fuel and food could reduce investors' willingness to invest in 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 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%. Michael Kramer, founder and CEO of Mott Capital Management, noted, 'Oil prices are rising alongside yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks.' Despite this, U.S.-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 urge caution, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, stated, 'The recent Bitcoin price increase is completely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, albeit at a slower pace. The same phenomenon 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. Speculation in non-serious tokens is also on the rise, with overcrowding in bullish bets, prompting a need for caution.