Bitcoin's Uptrend Faces Setback Amid Pentagon's Inflation Warning

Bitcoin's attempt to break through the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted the potential for prolonged inflation, citing the challenges of clearing mines in the Strait of Hormuz, a critical oil transportation route. According to the briefing, this process could take at least six months and will only commence after the U.S.-Iran conflict has been resolved. The warning also indicated that elevated gasoline and oil prices may persist through the midterm elections, as reported by the Washington Post. The persistent increase in energy costs threatens to maintain inflation at high levels, limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging environment for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. Moreover, rising costs for essential items like fuel and food may lead investors to allocate less capital to speculative assets. These risks are already manifesting in the markets, with WTI crude prices rising to around $95 from $79 late last week. Government bond yields are also increasing across major economies, with the U.S. 10-year yield rising by eight basis points to 4.32% this week and its U.K. counterpart increasing by 18 basis points to 4.96%. According to Michael Kramer, founder and CEO of Mott Capital Management, 'Oil prices are rising in tandem with yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks.' Despite these challenges, U.S.-listed spot bitcoin ETFs continue to exhibit sustained demand, with funds experiencing their fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode. However, some analysts are advising caution, arguing 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 entirely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, albeit at a slower pace. This same phenomenon occurred in January when Bitcoin peaked at $98K. There is a risk of correction if traders begin 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. Meanwhile, speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For further analysis of today's activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk's 'Crypto Week Ahead.' Today's signal is indicated by the chart showing fluctuations in the ratio between bitcoin's price and gold. The ratio has been steadily rising and has now surpassed the 100-day average. More importantly, the 50-day average could soon move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum and potential continued outperformance of bitcoin relative to gold.