A record gap between diesel and crude oil prices, driven by wars in Iran and Ukraine, threatens to reignite inflation fears just as Goldman Sachs plays down the odds of a September Fed rate hike. Bitcoin, trading near $64,274.04, sits between that inflation risk and a weakening dollar that has historically supported the asset.
Bitcoin is caught between two opposing forces this week: a widening energy-market squeeze that could revive inflation fears, and a falling U.S. dollar that has usually helped the asset. On Monday, CoinDesk reported that Goldman Sachs was downplaying the chance of a September Fed rate hike, citing slower inflation. That was seen as a potential tailwind for bitcoin, trading at $64,274.04. New data, however, is muddying that outlook.
The energy crack widens
The gap between diesel prices and the cost of crude oil used to produce it, known as the "crack," has surged to a record $102.20 a barrel. Wars in Iran and Ukraine are disrupting global oil supply, and that pressure is widening the crack just as seasonal demand peaks because farmers need fuel to run tractors and harvest crops.
That has real implications for inflation on Main Street. According to the Hormuz Letter, a widely tracked X account covering Middle East and commodities news, agriculture runs on diesel equipment and shipping, and everything moved by truck or ship will drive inflation higher. Macro writer Mike "Mish" Shedlock put it more bluntly: "Record high crack spreads. Serious economic ramifications."
Even as oil prices retreat from their second-quarter highs, oil products are getting more expensive, and the broader market, including bitcoin, may not have fully priced that in yet.
Yields rise, dollar falls
Crude itself may be due for a bounce: it has emerged from a four-month-long bearish trend, and tanker traffic through the Strait of Hormuz remains disrupted. Those factors, combined with concerns about government debt levels, continue to push yields on U.S. Treasuries and other advanced-economy bonds higher, which raises the opportunity cost of holding other assets and may cap bitcoin's gains.
One factor still works in bitcoin's favor, at least for now. The Dollar Index fell to a two-and-a-half-month low of 99.29 on Monday and broke down out of a bullish trendline, a technical signal pointing to further losses ahead. A weaker dollar has historically been a supportive backdrop for bitcoin.
Source: CoinDesk
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