Bitcoin's Uptrend Faces Challenge from Pentagon Warning on Inflation

Bitcoin's apparent momentum towards breaking through the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A notable development emerged from a classified Pentagon briefing to US lawmakers, which stated that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, could take at least six months and will only commence after the US-Iran conflict has ended. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, as reported by the Washington Post. Prolonged high energy costs could lead to persistent inflation, limiting the Federal Reserve's ability to cut interest rates, thereby creating a negative environment for risk assets. As bitcoin is highly sensitive to interest rates and global liquidity conditions rather than real economic activity, rising essential costs could reduce investors' willingness to invest in speculative assets. These risks are already manifesting in markets, with WTI crude climbing to around $95 from $79 last week, and government bond yields increasing 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 funds experiencing their fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode. However, some analysts urge 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, and for a comprehensive list of events this week, see CoinDesk's 'Crypto Week Ahead.' A key signal is the fluctuation in the ratio between bitcoin's price and gold, which has been steadily rising and has now topped the 100-day average, potentially confirming a bullish crossover.