Bitcoin's Upward Trajectory Confronts Inflation Concerns Backed by Pentagon

As bitcoin appeared poised to break through the $80,000 threshold, macroeconomic uncertainty reemerged as a significant obstacle. The Pentagon informed U.S. lawmakers in a confidential briefing that clearing mines in the Strait of Hormuz, a critical oil chokepoint, could take at least six months and would only commence after the U.S.-Iran conflict is resolved. According to the Washington Post, the briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections. Persistently high energy costs pose a risk of keeping inflation high, limiting the Federal Reserve's ability to reduce interest rates. This creates a challenging environment for risk assets, particularly bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. 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 markets, with WTI crude climbing to around $95 from $79 late last week. Government bond yields are rising across major economies, with the U.S. 10-year yield increasing by eight basis points to 4.32% this week, and its U.K. counterpart rising by 18 basis points to 4.96%. "Rising oil prices, alongside increasing yields and widening volatility spreads, signal tighter financial conditions and heightened market risks," said Michael Kramer, founder and CEO of Mott Capital Management. 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. "The recent increase in Bitcoin's price is driven solely by demand in the perpetual futures market. Meanwhile, spot demand is still contracting, albeit at a slower pace. This is similar to what happened in January when Bitcoin peaked at $98K. There is a risk of a correction if traders start taking profits while spot demand continues to contract," said Julio Moreno, head of research at CryptoQuant. The market capitalization of USDT, the largest dollar-pegged stablecoin, has reached a record high of $188.88 billion. Meanwhile, 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. 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 in candlestick format. The red line represents 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 surpassed the 100-day average. More importantly, the 50-day average could soon move above the 100-day average, confirming a bullish crossover, which suggests a bullish shift in momentum.