Bitcoin's Uptrend Faces Challenge from Pentagon's Inflation Warning

Bitcoin's apparent momentum towards a breakout above $80,000 has been hindered by renewed macroeconomic uncertainty. A classified briefing by the Pentagon to U.S. lawmakers revealed that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, may take at least six months and will only commence after the U.S.-Iran conflict is resolved. This briefing also cautioned that gasoline and oil prices might remain elevated until the midterm elections, according to the Washington Post. The persistence of high energy costs could keep inflation high, limiting the Federal Reserve's ability to cut interest rates, which would negatively impact risk assets like bitcoin. Bitcoin is particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. Rising costs of essential items such as 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 and government bond yields increasing across major economies. The U.S. 10-year yield has risen by eight basis points to 4.32%, and 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 the 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 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, while speculation in non-serious tokens is reaching a fever pitch. The ratio between bitcoin's price and gold has been steadily rising, topping the 100-day average, and the 50-day average could soon move above the 100-day average, confirming a bullish crossover.