The Yen, The Won, And The Correlation That Won't Quit 🪙

Bitcoin's price has shown an unusually strong negative 52-week correlation with the dollar-yen exchange rate, with about 81% of its weekly moves corresponding to shifts in USD/JPY. The pattern challenges the long-held carry-trade theory that a strengthening yen should trigger risk aversion across crypto markets.

Data from TradingView shows the 52-week rolling correlation coefficient between bitcoin's dollar price on Coinbase (COIN) and USD/JPY has dropped to -0.90, the most negative reading since late 2022. A coefficient at that level means bitcoin and USD/JPY have moved in opposite directions the vast majority of the time, with the yen and bitcoin tending to move together. As of publication, BTC/USD on Coinbase was quoted at $59,347.81.

The carry-trade narrative argues for the opposite relationship. For more than a decade, traders have borrowed cheaply in yen to invest in higher-yielding, riskier assets, and a strengthening yen has historically triggered unwinds of those positions. That dynamic was visible in July and August 2024, when the Bank of Japan raised interest rates, sending the yen sharply higher. Risk assets sold off, with BTC falling from $65,000 to $50,000 in the following weeks.

Recently, however, the yen has weakened against the dollar, hitting multi-decade lows against the greenback this week. That move has revived expectations of more aggressive policy action by the Bank of Japan to stem further slide. Under the carry-trade view, any such action and a resulting rise in the yen would weigh on risk assets including bitcoin.

Market analysts noted the apparent link may instead be a byproduct of broader dollar strength driven by shifting Federal Reserve interest-rate expectations, rather than a direct relationship between bitcoin and the yen. Correlation does not necessarily imply causation, even though statisticians often use the phrase "explained" when describing the share of price variation linked to another variable.