Just like bitcoin appeared to have built momentum for a breakout above $80,000, macro uncertainty re-emerged as a headwind.
The most notable development came from the Pentagon, which told US lawmakers in a classified briefing that clearing mines in the Strait of Hormuz, a major oil choke point, could take at least six months and the process would only begin after the US-Iran conflict ends. The briefing also warned that gasoline and oil prices may remain high through the midterm elections, according to the Washington Post.
Persistently high energy costs risk keeping inflation sticky, leaving the Federal Reserve with limited room to cut interest rates, a negative backdrop for risk assets. Bitcoin in particular remains very sensitive to interest rates and global liquidity conditions rather than real economic activity. Rising costs of essentials such as fuel and food can also reduce investors’ willingness to allocate capital to speculative assets.
These risks are already showing up in the markets. WTI crude has risen to around $95 from $79 at the end of last week, as government bond yields rise across major economies. The US 10-year yield is up eight basis points to 4.32% this week and its UK counterpart is up 18 basis points to 4.96%.
“Oil prices are rising alongside yields and widening volatility spreads, signaling tighter financial conditions and rising market risks,” said Michael Kramer, founder and CEO of Mott Capital Management.
This is an excerpt from CoinDesk’s ‘Diary’ newsletter. Sign up here if you haven’t already.
Speaking of key indicators, US-listed spot bitcoin ETFs continue to show sustained demand, with funds seeing their fastest inflows in a month based on the seven-day moving average of net flows tracked by Glassnode.
Still, some analysts are urging caution, arguing that the rally lacks broad support in the spot market.
“The recent Bitcoin price increase is entirely driven by demand in the perpetual futures market. Meanwhile, spot demand is still falling (albeit at a slower pace). The same 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 X CryptoQuant.
The market capitalization of USDT, the largest dollar-pegged stablecoin, has hit an all-time high of $188.88 billion. Meanwhile, speculation in non-serious tokens such as is reaching fever pitch, with overcrowding in bullish bets. Pay attention!
Read more: 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.”
What is trending
Today’s signal
The chart shows fluctuations in the ratio of bitcoin’s price to gold, shown 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. As the name suggests, it indicates a bullish shift in momentum.
That would mean a continued outperformance of bitcoin relative to gold.
