Bitcoin's apparent momentum towards breaking through the $80,000 threshold has been hindered by renewed macroeconomic uncertainty. A notable development came from a classified Pentagon briefing to U.S. lawmakers, which stated that clearing mines in the Strait of Hormuz, a critical oil passage, could take a minimum of six months and would only commence after the resolution of the U.S.-Iran conflict. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, as reported by the Washington Post.
Sustained high energy costs pose a risk of persistent inflation, limiting the Federal Reserve's ability to reduce interest rates, which could negatively impact risk assets. Bitcoin, being highly sensitive to interest rates and global liquidity conditions, may be particularly affected. The increased costs of essential items like fuel and food could also discourage investors from allocating capital to speculative assets. These risks are already manifesting in markets, with WTI crude rising 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 this, U.S.-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 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 a more in-depth analysis of today's activity in altcoins and derivatives, see Crypto Markets Today, and for a comprehensive list of events this week, see CoinDesk's 'Crypto Week Ahead.'