Bitcoin's Uptrend Faces Challenge from Pentagon's Inflation Warning

Bitcoin's apparent momentum towards breaking the $80,000 barrier has been hindered by renewed macroeconomic uncertainty. A classified briefing by the Pentagon to US lawmakers highlighted that clearing mines in the Strait of Hormuz, a crucial oil chokepoint, may take at least six months and will only commence after the US-Iran conflict is resolved. This warning also indicated that gasoline and oil prices might remain high until the midterm elections, according to the Washington Post. The persistent high energy costs could lead to sticky inflation, limiting the Federal Reserve's ability to cut interest rates, which would negatively impact risk assets like bitcoin. The cryptocurrency is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs of essentials such as fuel and food could reduce investors' willingness to invest in speculative assets. These risks are already evident in the markets, with WTI crude rising to around $95 from $79 and government bond yields increasing across major economies. The US 10-year yield has risen by eight basis points to 4.32%, while its UK counterpart has increased by 18 basis points to 4.96%. Michael Kramer, founder and CEO of Mott Capital Management, noted that '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, arguing that the rally lacks broad-based support in the spot market. Julio Moreno, head of research at CryptoQuant, warned that 'the recent Bitcoin price increase is completely driven by demand in the perpetual futures market. Meanwhile, spot demand is still contracting.' 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 increasing, with overcrowding in bullish bets. The ratio of bitcoin's price to gold has been steadily rising, with the 50-day average potentially moving above the 100-day average, confirming a bullish crossover.