As bitcoin appeared to be gaining momentum to break through the $80,000 barrier, macroeconomic uncertainty has resurfaced as a significant obstacle. A classified briefing by the Pentagon to US lawmakers revealed that clearing mines in the Strait of Hormuz, a critical oil chokepoint, could take at least six months and will only commence after the US-Iran conflict is resolved. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, according to the Washington Post.
Prolonged high energy costs could keep inflation high, limiting the Federal Reserve's ability to cut interest rates, which would negatively impact risk assets. Bitcoin, being highly sensitive to interest rates and global liquidity conditions, may be particularly affected. Rising costs of 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 late last week, and government bond yields increasing across major economies. The US 10-year yield has risen by eight basis points to 4.32% this week, while its UK 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, US-listed spot bitcoin ETFs continue to show sustained demand, with funds experiencing their fastest inflows in a month. 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 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. 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 shows fluctuations in the ratio between bitcoin's price and gold, with the ratio steadily rising and topping the 100-day average.
The 50-day average could soon 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.