Bitcoin's Uptrend Faces Inflation Warning from Pentagon

As bitcoin appeared to be gaining momentum to break through the $80,000 threshold, macroeconomic uncertainty resurfaced as a significant obstacle. A classified briefing by the Pentagon to U.S. lawmakers revealed that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, could take a minimum of six months and will only commence after the U.S.-Iran conflict is resolved. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, according to the Washington Post. This could lead to persistent inflation, limiting the Federal Reserve's ability to reduce interest rates, which would have a negative impact on risk assets like bitcoin. The cryptocurrency's value is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs of essential items such as fuel and food could also deter investors from allocating capital to speculative assets. These risks are already manifesting in markets, with WTI crude prices surging 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 that '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 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, warned 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, while speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For 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.' The ratio of bitcoin's price to gold has been steadily rising and has now topped the 100-day average, with the 50-day average potentially moving above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum, indicating continued outperformance of bitcoin relative to gold.