Bitcoin's Uptrend Faces Inflation Warning from Pentagon

As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty has resurfaced as a significant obstacle. A classified briefing by the Pentagon to U.S. lawmakers revealed that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, 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 the Washington Post. Prolonged high energy costs pose a risk of sustaining inflation, thereby limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging environment for risk assets, with bitcoin being particularly sensitive to interest rates and global liquidity conditions rather than real economic activity. The rising costs of essential items such as fuel and food could also deter investors from allocating capital to speculative assets. These risks are already manifesting in the markets, with WTI crude prices surging to around $95 from $79 late last week. Government bond yields are also increasing across major economies, with the U.S. 10-year yield rising by eight basis points to 4.32% this week and its U.K. counterpart increasing 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 increasing market risks.' Meanwhile, 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, noted that 'The recent Bitcoin price increase is completely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, albeit at a slower pace.' The market capitalization of USDT, the largest dollar-pegged stablecoin, has reached a record high of $188.88 billion. Speculation in non-serious tokens is also nearing a fever pitch, with overcrowding in bullish bets. For a more in-depth 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 fluctuations in the ratio between bitcoin's price and gold, with the red line representing 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, with the 50-day average poised to move above the 100-day average, confirming a bullish crossover.