Bitcoin's Uptrend Faces Obstacles as Pentagon Warns of Prolonged Inflation

As bitcoin appeared poised to break through the $80,000 barrier, macroeconomic uncertainty has resurfaced as a significant obstacle. A classified briefing by the Pentagon to U.S. lawmakers highlighted that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, could take at least 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. This could lead to persistently high energy costs, limiting the Federal Reserve's ability to cut interest rates and creating a challenging environment for risk assets like bitcoin, which is highly sensitive to interest rates and global liquidity conditions. Rising costs for essential items such as fuel and food could also reduce investors' willingness to allocate capital to speculative assets. These risks are already evident 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 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. The ratio between bitcoin's price and gold has been steadily rising and has now topped 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.