Potential Relief for Bitcoin and Nasdaq as Yen’s Bullish Run Appears Overextended

Yen Strength May Reverse, Offering Relief for Bitcoin and Nasdaq

Bitcoin (BTC) and the Nasdaq have faced pressure in recent weeks, coinciding with a sharp rally in the Japanese yen (JPY) and rising Japanese government bond yields. While this could be purely correlation, history suggests that yen appreciation often triggers risk-off sentiment across global markets, pressuring equities and cryptocurrencies.

For years, the yen’s role as a low-yielding funding currency has supported asset prices, but its recent surge has contributed to risk aversion in both traditional and crypto markets. However, data from the Commodity Futures Trading Commission (CFTC) via MacroMicro indicates that speculative positioning in the yen is now heavily skewed to the long side. When traders overwhelmingly bet on one direction, the risk of an abrupt reversal increases. If yen strength fades, risk assets like bitcoin and the Nasdaq could benefit.

Institutional Investors Could Slow Yen’s Ascent

Morgan Stanley’s G10 FX Strategy team has highlighted that strong demand from Japanese institutions for foreign assets may limit further yen appreciation. The Nippon Individual Savings Account (NISA) program allows retail investors to allocate funds into global markets, while Japan’s public pension fund often rebalances away from yen-denominated holdings, softening the currency’s rise.

This dynamic played out last August when the yen’s sharp appreciation coincided with a pullback in risk assets, only for the trend to reverse. USD/JPY initially dropped to 140 before rebounding to 158.50 by January, while BTC climbed from $50,000 to a record $108,000 over the same period.

Currently, bitcoin is trading near $80,300, reflecting a 5% month-to-date decline following February’s 17.6% drop. Earlier Tuesday, BTC briefly fell to $76,800, according to CoinDesk data. Meanwhile, USD/JPY is hovering around 147.23 after reaching a five-month low of 145.53 earlier in the day, per TradingView data.

Caution Ahead Despite Potential Short-Term Reprieve

While a near-term pullback in the yen could provide some relief for bitcoin and equities, broader macro trends continue to favor yen strength. The yield differential between U.S. and Japanese government bonds has narrowed to 2.68%, its lowest level since August 2022, signaling a long-term shift toward a stronger yen.

If previous patterns hold, bitcoin and the Nasdaq may see a temporary rebound, but traders should stay alert for renewed volatility driven by fluctuations in currency markets and broader macroeconomic trends.

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