Bitcoin's Upward Trajectory Faces Challenge from Pentagon's Inflation Warning

As bitcoin appeared poised to break through the $80,000 threshold, broader economic uncertainty has reemerged as a significant obstacle. A notable development came from the Pentagon, which warned U.S. lawmakers in a classified briefing that demining efforts in the Strait of Hormuz could take at least 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 until the midterm elections, according to the Washington Post. The persistence of high energy costs threatens to keep inflation elevated, limiting the Federal Reserve's ability to reduce interest rates. This scenario presents a challenging backdrop for risk assets, as bitcoin is particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. Moreover, rising costs for essential items like fuel and food could diminish investors' appetite for speculative assets. These risks are already manifesting in the markets, with WTI crude prices surging 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 in tandem with yields and widening volatility spreads, signaling tighter financial conditions and increasing market risks.' Despite these challenges, 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 entirely driven by demand in the perpetual futures market, while spot demand continues to contract, albeit at a slower pace. This phenomenon also occurred in January when Bitcoin peaked at $98K, and there are risks of a correction if traders begin 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 intensifying, with overcrowding in bullish bets. For a more in-depth 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 current trend Today's signal The chart displays the fluctuations in the ratio between bitcoin's price and gold in candlestick format. The red line represents 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 surpassed the 100-day average. More importantly, the 50-day average is poised to move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum and continued outperformance of bitcoin relative to gold.