Bitcoin's Uptrend Faces Headwinds Amid Pentagon Warning on Inflation

Bitcoin's apparent momentum towards breaking the $80,000 barrier has been countered by renewed macroeconomic uncertainty. A significant development came from the Pentagon, which informed U.S. lawmakers in a classified briefing that demining 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 might remain elevated through the midterm elections, as reported by the Washington Post. The persistently high energy costs pose a risk of keeping inflation elevated, thereby limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging backdrop for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. The rising costs of essential items like fuel and food could also lead to a decrease in investors' willingness to allocate capital to speculative assets. These risks are already manifesting in the 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.' For key indicators, 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, stated on X, '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 occurred 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 further 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 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 topped the 100-day average. More importantly, the 50-day average could soon move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum, indicating continued outperformance of bitcoin relative to gold.