BTC and Nasdaq Could Steady Amid Signs of Overcrowded Yen Long Positions

Yen Strength Faces Resistance, Potentially Boosting Bitcoin and Nasdaq

The recent slump in both the Nasdaq and bitcoin (BTC) has coincided with a surge in Japanese government bond yields and a strengthening Japanese yen (JPY), mirroring market conditions from last August. While some may see this as coincidence, historical trends suggest a deeper connection—one where the yen’s appreciation often pressures global risk assets.

For years, the yen’s role as a low-yielding funding currency has supported global asset prices. However, its recent rally may have contributed to heightened risk aversion in traditional markets and crypto. Despite this, bullish positioning in the yen appears overstretched. Data from the Commodity Futures Trading Commission (CFTC) via MacroMicro shows speculators held record-long yen positions last week—an extreme positioning that often leads to unwinding and a potential price reversal. If the yen stabilizes or weakens, risk assets like bitcoin and Nasdaq could see a relief rally.

Institutional Investors Could Slow Yen’s Advance

Morgan Stanley’s G10 FX Strategy team noted that further yen appreciation might be difficult to sustain due to two key factors: speculative positioning and Japanese institutional investors stepping in to buy foreign assets. The Nippon Individual Savings Account (NISA) program encourages Japanese investors to accumulate overseas assets, while Japan’s public pension fund often counterbalances market trends by reallocating away from yen assets.

A similar scenario played out last August when a sharp yen rally coincided with a steep equity sell-off. Shortly after, risk assets rebounded. USD/JPY fell to 140 in early August before climbing to 158.50 by January, while BTC rebounded from $50,000 to a record high above $108,000 in the same period.

Currently, bitcoin is trading near $80,300, down about 5% this month after February’s 17.6% decline. Earlier Tuesday, BTC briefly dropped to $76,800, according to CoinDesk data. Meanwhile, USD/JPY is trading at 147.23 after hitting a five-month low of 145.53 earlier in the day, per TradingView data.

Short-Term Stability, But Yen’s Strength Remains a Factor

While the potential for yen weakness could provide short-term relief for bitcoin and the Nasdaq, the broader trend still favors JPY strength. The narrowing yield spread between U.S. and Japanese government bonds—now at 2.68%, its lowest level since August 2022—signals a major shift in the yen’s outlook. Additionally, the spread has broken below a long-term macro uptrend, reinforcing the bullish yen narrative.

Despite a possible stabilization in risk assets, traders should remain vigilant for volatility in the yen and broader financial markets, as shifts in currency strength could continue influencing bitcoin and equity prices.