Bitcoin's Uptrend Faces Challenge from Inflation Warning Backed by Pentagon

As bitcoin appeared poised to break through the $80,000 barrier, macroeconomic uncertainty has reemerged as a significant obstacle. A classified briefing by the Pentagon to US 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 US-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. The persistence of high energy costs threatens to keep inflation high, limiting the Federal Reserve's ability to lower interest rates. This creates a challenging environment for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. The rising costs of essential items like fuel and food could also deter investors from allocating capital to speculative assets. These risks are already manifesting in the markets, with WTI crude climbing to around $95 from $79 late last week. Government bond yields are also rising across major economies, with the US 10-year yield increasing by eight basis points to 4.32% this week and its UK counterpart rising 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.' US-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, 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 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 reaching a fever pitch, with overcrowding in bullish bets. For 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.' The chart shows fluctuations in the ratio between bitcoin's price and gold, displayed in candlestick format. The ratio has been steadily rising and has now topped 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.