Bitcoin's Advance Halted by Inflation Concerns Backed by Pentagon

Bitcoin's apparent momentum towards breaking the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A recent classified briefing by the Pentagon to US 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 US-Iran conflict is resolved. The briefing also indicated that gasoline and oil prices may remain elevated through the midterm elections, as reported by the Washington Post. This could lead to persistent inflation, limiting the Federal Reserve's ability to reduce interest rates, which in turn creates a challenging environment for risk assets like bitcoin. The cryptocurrency is particularly sensitive to interest rates and global liquidity conditions rather than actual economic activity. Additionally, rising costs of essentials such as fuel and food might reduce investors' willingness to invest in speculative assets. These risks are already manifesting in markets, with WTI crude prices increasing to around $95 from $79 last week, and government bond yields rising 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 the fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode. However, some analysts urge caution, suggesting the rally lacks broad support in the spot market. Julio Moreno, head of research at CryptoQuant, noted that the recent bitcoin price increase is driven by demand in the perpetual futures market, while spot demand is still contracting. 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 intensifying, 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, indicating a bullish shift in momentum.