As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty has resurfaced as an obstacle. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a critical oil passage, could take a minimum of six months and will only commence after the U.S.-Iran conflict is resolved.
The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, according to a report by the Washington Post. Persistent high energy costs pose a risk of keeping inflation elevated, limiting the Federal Reserve's ability to reduce interest rates, which would have a negative impact on risk assets.
Bitcoin, being highly sensitive to interest rates and global liquidity, rather than real economic activity, could be particularly affected. The rising costs of essential items like fuel and food could also lead to reduced investment in speculative assets. These risks are already manifesting in the markets, with WTI crude prices surging 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%, 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 heightened 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 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 entirely driven by demand in the perpetual futures market, while spot demand is still contracting, albeit at a slower pace. This is reminiscent of January when Bitcoin peaked at $98K, and 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, with overcrowding in bullish bets. For further 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.'