The data show a significant increase in the connection of bitcoin with the United States dollar to the Japanese yen in the recent past. The BTC/USD-related coefficient for Coinbase and USD/JPY has fallen to -0.90, the strongest and most negative correlation since the end of 2022. This means that, over the past year, the movement of bitcoin vis-à-vis the Japanese yen has become more synchronized.

Relevant coefficient down to -0.90

According to TradingView data, this correlation coefficient corresponds to R2 about 0.81, i.e. about 81 per cent of BTC/USD weekly fluctuations can be statistically explained by changes in USD/JPY. For the foreign exchange market, USD/JPY rises represent a weakness of the yen; in this framework, bitcoin is usually strong when moving down the USD/JPY and weak when travelling on the USD/JPY.

This group of data is of concern because the correlation between Bitcoin and the major foreign currency currencies is generally unstable, with fluctuations between -0.3 and +0.3 for most of the time. Like -0.90, 52 weeks of reading is not common.

The traditional arbitrage has been affected.

In the past, the market has used the term “Japanese yen arbitrage” to explain the volatility of risk assets. For a long time, the low interest rate environment has made the yen a financing currency, and traders have borrowed the yen to invest in equities, bonds or encrypted assets with higher returns. Under this logic, a weak yen usually favours a risk asset, while a strong yen may trigger a risk transaction.

This narrative was validated in the summer of 2024. The Central Bank of Japan raised interest rates at the time, boosting the rapid appreciation of the yen, and then the risk assets were generally under pressure, with bitcoin also falling from around $65,000 to around $50,000. In the near future, with the yen falling back to decades of lows, the market has begun to discuss whether the Bank of Japan will take more radical policy action.

It's more likely to be the dollar.

However, this high correlation does not necessarily imply a direct causal link between Bitcoin and Japanese yen. The more likely explanation is that both respond to the changes in the strength and weakness of the United States dollar at the same time, thus showing a strong statistical connection.

The article mentions that the market has recently been recalculated into the Federal Reserve ' s interest expectations of at least one 25 basis points during the year. This anticipated change in interest rates compared to the previous downswing has contributed to the strengthening of the United States dollar as a whole. During the same period, the euro, the Australian dollar, the New Zealand dollar and the gold and silver have weakened against the dollar.

  • 52 Weekly scroll-related coefficient -0.90
  • Corresponding R2 to approximately 0.81
  • The dollar is still a core observation variable.

Against this background, the synchronizing of bitcoin with Japanese yen does not necessarily indicate that the “Japanese yen arbitrage silo” is leading the encrypted market and is more likely to reflect the co-effects of a stronger dollar on a variety of types of assets.