Bitcoin's price has been closely tracking the USD/JPY exchange rate, undercutting the carry-trade theory that yen strength could trigger risk aversion in the crypto market.
A strong negative correlation between BTC/USD and USD/JPY indicates that BTC tends to fall when the yen strengthens against the dollar and rise when the yen weakens, moving in lockstep against the dollar with the yen’s movements.
The 52-week rolling correlation between Coinbase's BTC/USD and the USD/JPY pair stands at -0.90, according to data from TradingView. That is the most negative reading since late 2022. Squaring that figure yields an R² of about 0.81, meaning roughly 81% of the weekly variation in BTC/USD can be statistically explained by movements in USD/JPY.
The reading challenges the traditional carry-trade narrative that yen moves imply risk appetite for BTC. In late July/early August 2024, when the Bank of Japan hiked rates and the yen strengthened sharply, risk assets deteriorated, with BTC sliding from roughly $65,000 to $50,000 in the following weeks. More recently, the yen has slid to four-decade lows, raising expectations of further BOJ action to stem the decline. In this context, the latest correlation could imply that a rise in the yen might actually support BTC, contrary to carry-trade expectations.
Correlation does not necessarily imply 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/USD–USD/JPY relationship. Markets have priced in at least one 25-basis-point Fed rate hike this year. That hawkish repricing has broadly strengthened the dollar, with the euro, the Australian dollar, the New Zealand dollar, gold and silver all declining against the greenback over the same period. Traders should weigh that caveat before drawing firm conclusions from the BTC/USD and USD/JPY correlation alone.
