Under the “yen carry trade” framework, a weak yen (rising USD/JPY) is assumed to be accompanied by a rise in BTC, just as it tends to support stocks. Expanding on that logic, a strengthening yen should trigger risk aversion in both stocks and cryptocurrencies.
That is precisely what happened in late July/early August 2024, when the Bank of Japan raised interest rates, sending the yen sharply higher. Risk assets suffered a crash, with BTC falling from approximately $65,000 to $50,000 in the following weeks.
Fears of the carry unraveling have resurfaced lately as the yen continues to fall, hitting four-decade lows this week. This has raised hopes of more aggressive action by the BOJ to stem the yen’s decline.
However, if we go by the latest correlation, possible BOJ action and a resulting rise in the yen could actually put a floor on BTC, working in the opposite direction than carry-trade logic would predict.
A mirage?
Correlation does not necessarily mean causation.
Neither BTC nor the yen may be driving the other directly. Instead, the overall strength or weakness of the US dollar may be moving both assets independently, creating the appearance of a close BTC-yen relationship.
That reading makes sense in context: Markets have recently priced in at least a 25 basis point interest rate increase by the Federal Reserve this year. That aggressive revaluation, a sharp reversal from earlier hopes for rate cuts, has boosted the dollar broadly. The euro, Australian dollar, New Zealand dollar, gold and silver have all fallen against the dollar over the same period.
