Bitcoin's Uptrend Faces Challenge from Pentagon Warning on Inflation

As bitcoin appeared to gain momentum to break through the $80,000 threshold, macroeconomic uncertainty has reemerged as an obstacle. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a crucial oil passage, could take a minimum of six months and will only commence after the resolution of the U.S.-Iran conflict. The briefing also cautioned that gasoline and oil prices might remain elevated until the midterm elections, as reported by the Washington Post. Sustained high energy costs could lead to persistent inflation, limiting the Federal Reserve's ability to lower interest rates, which would have a negative impact on risk assets. Bitcoin is particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. Increasing costs for essential items like fuel and food could also reduce investors' willingness to invest in speculative assets. These risks are already manifesting in markets, with WTI crude rising to around $95 from $79 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%. 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 the 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 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 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 more 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.'