Bitcoin’s Inverse Link to Dollar-Yen Pair Raises Doubts Over Carry Trade Impact

Bitcoin has developed a pronounced inverse relationship with the dollar-yen exchange rate over the past year.

The cryptocurrency has been closely tracking moves in the yen against the U.S. dollar, typically slipping as the Japanese currency weakens. This behavior runs counter to the widely held carry-trade thesis, which suggests that a stronger yen should weigh on risk assets like crypto.

TradingView data shows 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 reading signals a strong inverse link: bitcoin tends to decline when USD/JPY rises (yen weakens) and climb when the yen strengthens. Roughly 81% of BTC’s weekly price changes align with shifts in the currency pair.

This dynamic challenges the traditional carry-trade narrative, which associates a weaker yen with strength in bitcoin and other risk assets. For years, traders have borrowed cheaply in yen to fund investments in higher-yielding markets.

Under that framework, a stronger yen should trigger deleveraging and pressure risk assets. That played out in mid-2024, when the Bank of Japan raised rates, boosting the yen and sparking a broad selloff. Bitcoin fell from about $65,000 to $50,000 in the following weeks.

Recently, concerns over a potential carry-trade unwind have resurfaced as the yen slid to multi-decade lows, increasing expectations that the Bank of Japan could step in to support the currency.

However, if the current correlation persists, any policy-driven rebound in the yen could actually help stabilize or lift bitcoin—contradicting conventional expectations.

It’s important to note that correlation does not imply causation. The relationship doesn’t necessarily mean bitcoin and the yen are directly influencing each other.

A more plausible explanation is that broader U.S. dollar strength or weakness is driving both assets independently, creating the appearance of a tight inverse connection.

Markets are now pricing in at least one 25 basis-point rate hike from the Federal Reserve this year. This hawkish shift—reversing earlier expectations for rate cuts—has strengthened the dollar against major currencies such as the euro, Australian dollar, and New Zealand dollar, as well as against commodities like gold and silver.

Given these dynamics, traders should be cautious about drawing firm conclusions based solely on the BTC/USD and USD/JPY correlation.