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

Bitcoin's apparent momentum towards breaking through the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A significant development emerged from a classified Pentagon briefing to US lawmakers, stating that clearing mines in the Strait of Hormuz, a crucial oil passage, may take at least six months and will only commence after the US-Iran conflict concludes. The briefing also cautioned that gasoline and oil prices might remain elevated until the midterm elections, as reported by the Washington Post. Prolonged high energy costs could lead to persistent inflation, limiting the Federal Reserve's ability to reduce interest rates, which would negatively impact risk assets. As bitcoin is particularly sensitive to interest rates and global liquidity conditions, rising costs for essential items like fuel and food may deter investors from allocating capital to speculative assets. These risks are already manifesting in markets, with WTI crude rising to around $95 from $79 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 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. '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,' said Julio Moreno, head of research at CryptoQuant. 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 intensifying, with overcrowding in bullish bets. The ratio between bitcoin's price and gold has been steadily rising, topping the 100-day average, with the 50-day average potentially moving above the 100-day average, confirming a bullish crossover, which suggests continued outperformance of bitcoin relative to gold.