First gold and silver, now oil's starting to rally and that's bad news for bitcoin

For bitcoin (BTC) bulls, it feels like one setback after another. First precious metals like gold and silver surged to record highs, sucking capital away from the crypto market. And now oil's starting to surge too, threatening to skew macroeconomic forces in favor of bitcoin bears.

The per barrel price for the West Texas Intermediate (WTI) crude, a type of light, sweet crude from Texas fields serving as benchmark for North American energy pricing, has risen by 12% to $64.30 this month. That's the highest price since September. It's European and international benchmark, Brent, has seen a similar rise to $68.22.

This is bad news for bitcoin bulls counting on steady inflation and lower interest rates in the U.S. and other parts of the world to reignite the rally. Bitcoin peaked above $126,000 in early October and has since dropped to under $90,000.

Oil feeds into inflation

Oil is a key ingredient in everyday goods and services, so when its price rises, it raises costs across the board. Higher oil makes gasoline pricier raising transport costs for everything, including food deliveries, clothes, electronics and more. These costs are then passed on the final consumer, raising the general price level in the economy.

This, in turn, leads to workers asking higher wages to keep up with rising inflation, leading to a self-fulfilling cycle where salaries climb, companies then raise prices even more.

"We find that oil price pass-through to inflation is both economically and statistically significant, and that it occurs both directly and through second-round effects," Federal Reserve's explainer says. "Higher energy prices can also raise consumer and business expectations for future inflation, indirectly raising food and core prices now."

Central banks typically react to rising inflation by hiking borrowing costs, making credit and money pricier across the board, just as the Fed did in 2022 when it rapidly raised interest rates to tame inflation. Bitcoin fell by 64% that year, with the so-called Fed tightening playing a major role in destabilizing the asset.

The latest oil price upswing comes as the Fed grapples with fresh inflation worries. On Wednesday, the central bank kept interest rates unchanged in the target range of 4.5% to 4.75%, and said inflation remains “somewhat elevated” due to President Donald Trump's tariffs – taxes on goods imported from abroad.

According to ING, the accompanying statement and press conference suggested that the Fed is "more confidence that the policy easing cycle is close to a conclusion."