Bitcoin's Uptrend Faces Inflation Concerns Backed by the Pentagon

As bitcoin appeared poised to break through the $80,000 barrier, uncertainty in the macroeconomic landscape has reemerged as a significant obstacle. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted the potential challenges in clearing mines from the Strait of Hormuz, a critical oil passage, which could take at least six months and would only commence after the resolution of the U.S.-Iran conflict. The briefing also cautioned that elevated gasoline and oil prices may persist through the midterm elections, according to reports from the Washington Post. Prolonged high energy costs could contribute to sticky inflation, limiting the Federal Reserve's ability to reduce interest rates, thereby creating an unfavorable environment for risk assets. Given bitcoin's sensitivity to interest rates and global liquidity conditions rather than real economic activity, rising costs for essential items like fuel and food could diminish investors' appetite for speculative assets. These risks are already manifesting in the markets, with WTI crude prices surging 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.' Despite these challenges, U.S.-listed spot bitcoin ETFs continue to exhibit 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 advise caution, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, noted, '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 market capitalization of USDT, the largest dollar-pegged stablecoin, has reached a record high of $188.88 billion, while speculation in certain tokens is approaching fever pitch, with overcrowding in bullish bets. The ratio of bitcoin's price to 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 and suggesting continued outperformance of bitcoin relative to gold.