As bitcoin appeared to gain momentum for a potential surge above $80,000, uncertainty in the macroeconomic environment has reemerged as a significant obstacle. A notable development came from a classified Pentagon briefing to U.S.
lawmakers, which stated that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, could take a minimum of six months and would only commence after the resolution of the U.S.-Iran conflict. The briefing also cautioned that gasoline and oil prices may remain elevated through the midterm elections, as reported by the Washington Post. This could lead to persistently high energy costs, potentially keeping inflation high and limiting the Federal Reserve's ability to cut interest rates, thereby creating a negative backdrop for risk assets like bitcoin. The cryptocurrency's value is highly sensitive to interest rates and global liquidity conditions rather than real economic activity.
Furthermore, rising costs of essential items such as fuel and food could reduce investors' willingness to allocate capital to speculative assets. These risks are already manifesting in markets, with WTI crude climbing to around $95 from $79 late last week, and government bond yields rising across major economies.
The U.S. 10-year yield has increased by eight basis points to 4.32% this week, while its U.K. counterpart has risen 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 these challenges, 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, 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 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. Meanwhile, 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.' The chart shows fluctuations in the ratio between bitcoin's price and gold, with the ratio steadily rising and topping the 100-day average. If the 50-day average moves above the 100-day average, it could confirm a bullish crossover, suggesting continued outperformance of bitcoin relative to gold.