Bitcoin-Dollar-Yen Correlation Hits -0.90, Challenging Carry Trade Narrative

Bitcoin has recently displayed a notably strong inverse 52-week correlation with the dollar-yen exchange rate.

The price of BTC has been moving closely in line with the yen’s performance against the U.S. dollar, declining as the Japanese currency weakens. This pattern contradicts the traditional “carry trade” view, which suggests that a stronger yen should lead to risk-off behavior in crypto markets.

Data from TradingView shows that the 52-week rolling correlation between bitcoin’s USD price on Coinbase and the USD/JPY pair has dropped to -0.90—its most negative level since late 2022.

Such a low coefficient signals a strong inverse relationship, meaning bitcoin tends to fall when USD/JPY rises (i.e., when the yen weakens), and rise when the yen strengthens. In practical terms, roughly 81% of BTC’s weekly price movements align with shifts in the USD/JPY rate.

This challenges the carry-trade narrative, which typically links a weaker yen with stronger performance in bitcoin and other risk assets. For years, traders have borrowed cheaply in yen to invest in higher-yielding, riskier markets.

Following that logic, a stronger yen should trigger a pullback in risk assets. That scenario played out in July–August 2024, when the Bank of Japan raised interest rates, pushing the yen higher and sparking a selloff across markets. Bitcoin dropped from around $65,000 to $50,000 in the weeks that followed.

Recently, concerns about a carry-trade unwind have resurfaced as the yen weakened to multi-decade lows, increasing expectations that the Bank of Japan may intervene more aggressively.

However, based on the current correlation, any policy action that strengthens the yen could actually support bitcoin prices—contrary to what traditional carry-trade theory would suggest.

It’s important to note that correlation does not imply causation. While the relationship appears strong, it doesn’t necessarily mean one asset is directly influencing the other.

A more likely explanation is that broader dollar strength or weakness is driving both bitcoin and the yen independently, creating the illusion of a tight relationship between the two.

Markets have recently begun pricing in at least one 25-basis-point rate hike by the Federal Reserve this year. This shift toward a more hawkish outlook—reversing earlier expectations of rate cuts—has boosted the dollar against multiple currencies, including the euro, Australian dollar, and New Zealand dollar, as well as against commodities like gold and silver.

As a result, traders should be cautious about drawing firm conclusions based solely on the correlation between BTC/USD and USD/JPY.