Yen Surge Nears Exhaustion, Potentially Boosting Bitcoin and Nasdaq
Bitcoin (BTC) and the Nasdaq have been under pressure recently, coinciding with a rapid appreciation of the Japanese yen (JPY) and a spike in Japanese government bond yields. While this could be a coincidence, past market cycles suggest that yen strength often correlates with risk-off sentiment in global markets, weighing on stocks and cryptocurrencies.
Historically, the yen’s role as a funding currency has helped support asset prices, but its recent rally has fueled a shift toward safer investments. However, data from the Commodity Futures Trading Commission (CFTC) via MacroMicro reveals that speculative positioning in the yen is at extreme long levels. Such imbalanced positions often lead to sharp reversals, which could trigger renewed buying in risk assets like bitcoin and tech stocks.
Japanese Institutions Could Cap Further Yen Strength
Morgan Stanley’s G10 FX Strategy team warns that continued yen appreciation may be limited due to strong demand from domestic investors seeking foreign assets. The Nippon Individual Savings Account (NISA) program encourages retail capital to flow into overseas investments, while Japan’s public pension fund tends to rebalance by selling yen-denominated holdings, potentially slowing the currency’s rally.
A similar pattern occurred in August last year when the yen’s rapid appreciation coincided with a sharp sell-off in equities and crypto. This was followed by a reversal, as USD/JPY rebounded from 140 to 158.50 by January, and BTC surged from $50,000 to an all-time high of $108,000.
At present, bitcoin is trading around $80,300, marking a 5% month-to-date decline following February’s 17.6% slump. Earlier Tuesday, BTC briefly dipped to $76,800, per CoinDesk data. Meanwhile, USD/JPY is hovering at 147.23 after reaching a five-month low of 145.53 earlier in the session, according to TradingView.
Short-Term Relief Possible, But Yen Bull Trend Persists
While a temporary pullback in the yen could provide relief for risk assets, the broader macroeconomic picture still favors a stronger yen. The U.S.-Japan bond yield differential has narrowed to 2.68%, the lowest since August 2022, reinforcing the longer-term case for yen appreciation.
If history repeats itself, bitcoin and the Nasdaq could experience a short-term rebound, but traders should remain cautious as broader market forces and ongoing yen strength could continue to drive volatility.
