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

As bitcoin seemed poised to break through the $80,000 threshold, macroeconomic uncertainty has re-emerged as a significant obstacle. The most notable development came from a classified Pentagon briefing to U.S. lawmakers, which warned that clearing mines in the strategic Strait of Hormuz oil passage could take a minimum of six months and will only commence after the U.S.-Iran conflict is resolved. The briefing, as reported by the Washington Post, also cautioned that gasoline and oil prices may remain elevated until the midterm elections, potentially keeping inflation high and limiting the Federal Reserve's ability to reduce interest rates. This could have negative implications for risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions. Moreover, rising costs for essential items like fuel and food could reduce investors' appetite for speculative assets. These risks are already manifesting in markets, with WTI crude prices climbing to around $95 from $79 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 these challenges, 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.'