Pentagon Inflation Warning Threatens Bitcoin's Bullish Momentum

Bitcoin's apparent momentum towards a breakout above $80,000 has been hindered by renewed macro uncertainty. A classified Pentagon briefing to U.S. lawmakers revealed that clearing mines in the Strait of Hormuz could take at least six months, and this process 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, as reported by the Washington Post. The persistence of high energy costs poses a risk of sticky inflation, limiting the Federal Reserve's ability to cut 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 may also reduce investors' willingness to allocate capital to speculative assets. These risks are already manifesting in markets, with WTI crude increasing to around $95 from $79 late last week, and government bond yields rising 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%. 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.' 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 completely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, although at a slower pace. The same 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 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 displays fluctuations in the ratio between bitcoin's price and gold, with the red line representing the 50-day moving average, the white line the 100-day moving average, and the yellow line the 200-day moving average. 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.