Bitcoin's Upward Trajectory Hits a Snag with Inflation Warning from the Pentagon

As bitcoin appeared poised to break through the $80,000 barrier, macroeconomic uncertainty has reemerged as a significant obstacle. The Pentagon recently informed U.S. lawmakers in a classified briefing that clearing mines in the Strait of Hormuz could take at least six months and will only commence after the U.S.-Iran conflict has ended. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, according to a report by the Washington Post. The persistence of high energy costs could lead to sticky inflation, limiting the Federal Reserve's ability to reduce interest rates, which would have a negative impact on risk assets like bitcoin. Bitcoin is particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. Furthermore, rising costs for essential items such as fuel and food could reduce investors' willingness to allocate capital to speculative assets. These risks are already manifesting in markets, with WTI crude increasing to around $95 from $79 late last week, and government bond yields rising across major economies. The U.S. 10-year yield has increased by eight basis points to 4.32% this week, while its U.K. counterpart has risen 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 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 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, with overcrowding in bullish bets. For 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 shows fluctuations in the ratio between bitcoin's price and gold, with the ratio steadily rising and now topping the 100-day average. The 50-day average could soon move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum and continued outperformance of bitcoin relative to gold.