Bitcoin's Uptrend Encounters Inflation Warning Backed by the Pentagon

As bitcoin appeared to gain momentum for a potential surge past $80,000, macroeconomic uncertainty has reemerged as an obstacle. The Pentagon recently informed U.S. lawmakers in a classified briefing that clearing mines in the Strait of Hormuz, a critical oil chokepoint, could take at least six months and will only commence after the U.S.-Iran conflict ends. The briefing also cautioned that gasoline and oil prices may remain elevated through the midterm elections, according to the Washington Post. Persistently high energy costs could keep inflation high, limiting the Federal Reserve's ability to cut interest rates. This creates a challenging environment for risk assets like bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs for essentials could also deter investors from allocating capital to speculative assets. These risks are reflected in markets, with WTI crude climbing to around $95 from $79 late last week, and government bond yields rising across major economies. The U.S. 10-year yield has increased by eight basis points to 4.32% this week, while 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 this, U.S.-listed spot bitcoin ETFs continue to show sustained demand, with funds seeing their 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, noted that '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 same happened 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. For further analysis of today's activity in altcoins and derivatives, see Crypto Markets Today, and for a comprehensive list of events this week, see CoinDesk's 'Crypto Week Ahead.'