Bitcoin's Upward Trend Encounters Inflation Warning Backed by the 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 U.S. lawmakers revealed that clearing mines in the Strait of Hormuz, a critical oil chokepoint, 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 may remain elevated until 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, which would create a challenging environment for risk assets. Bitcoin is particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs for essential items like fuel and food could also reduce investors' willingness to allocate capital to speculative assets. These risks are already manifesting in markets, with WTI crude rising 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%. 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 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 urging 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 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. The ratio of bitcoin's price to gold has been steadily rising, topping the 100-day average, with the 50-day average potentially moving above the 100-day average, confirming a bullish crossover.