Bitcoin’s tie to USD/JPY is the strongest it’s been since 2022. Here’s why that matters.

Under the “yen carry trade” framework, a weak yen (USD/JPY rising) is supposed to be accompanied by rising BTC, just as it tends to support stocks. Extending that logic, a strengthening yen should trigger risk aversion in both stocks and cryptocurrencies.

That’s precisely what happened in late July/early August 2024, when the Bank of Japan hiked interest rates, sending the yen sharply higher. Risk assets had a meltdown, with BTC falling from roughly $65,000 to $50,000 in the following weeks.

Carry-unwind fears have resurfaced lately as the yen continues to slide, hitting four-decade lows this week. That’s raised hopes of more aggressive action by the BOJ to stem the yen’s slide.

However, if the latest correlation is anything to go by, potential BOJ action and a resulting rise in the yen could actually put a floor under BTC, working the opposite way from what carry-trade logic would predict.

A mirage?

Correlation doesn’t necessarily mean causation.

Neither BTC nor the yen may be driving the other directly. Instead, broad US dollar strength or weakness may be moving both assets independently, creating the appearance of a tight BTC-yen relationship.

That reading makes sense in context: markets have recently priced in at least one 25-basis-point interest rate hike from the Fed this year. That hawkish repricing, a sharp reversal from earlier hopes of rate cuts, has lifted the dollar broadly. The euro, the Australian dollar, the New Zealand dollar, gold and silver have all declined against the greenback over the same stretch.