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

As bitcoin appeared to gain momentum to break through the $80,000 barrier, macroeconomic uncertainty has reemerged as a significant obstacle. A recent classified briefing by the Pentagon to U.S. lawmakers highlighted the challenges of clearing mines in the Strait of Hormuz, a major oil chokepoint, which could take at least six months and may only begin after the U.S.-Iran conflict is resolved. The briefing also cautioned that gasoline and oil prices may remain elevated until the midterm elections, as reported by the Washington Post. The persistence of high energy costs poses a risk of sticky inflation, limiting the Federal Reserve's ability to cut interest rates. This creates a negative environment for risk assets, including bitcoin, which is highly sensitive to interest rates and global liquidity conditions rather than real economic activity. Furthermore, rising costs of essentials like fuel and food could reduce investors' appetite for speculative assets. These risks are already manifesting in the markets, with WTI crude prices increasing to around $95 from $79 late last week, and government bond yields rising 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 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 urging caution, arguing that the rally lacks broad-based support in the spot market. As Julio Moreno, head of research at CryptoQuant, noted, '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. This pattern is similar to what 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. Meanwhile, speculation in non-serious tokens is reaching a fever pitch, with overcrowding in bullish bets. For further 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 the 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 topped 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 and continued outperformance of bitcoin relative to gold.