Bitcoin on Alert as Japan Warns of Yen Intervention… “Yen Strength and Dollar Weakness Could Amplify Bitcoin Volatility”

As Japan signals the possibility of intervening to support the yen—stoking volatility across global financial markets—investors are also turning their attention to how this may correlate with Bitcoin (BTC).

On the 25th (local time), BeInCrypto reported that “after Japan’s prime minister recently described yen moves as abnormal, the dollar-yen exchange rate fell sharply over a short period, ushering in yen strength. Given past episodes, such a move could also have a direct impact on the Bitcoin market,” adding that “when the yen strengthens and the dollar turns weaker, global liquidity tends to expand, which has historically been a favorable backdrop for Bitcoin over the medium to long term.”

However, some caution that the near-term dynamics could differ. During phases of yen strength, the ‘yen carry trade’—borrowing yen to invest in risk assets—can unwind rapidly. That process often comes with deleveraging, potentially triggering sharp volatility across crypto markets, including Bitcoin. In fact, when the Bank of Japan delivered a modest rate hike in August 2024, the yen’s shift to strength coincided with a steep short-term correction in Bitcoin.

Market experts are wary of a similar pattern this time. If yen intervention materializes, Bitcoin could initially come under pressure as risk-off sentiment intensifies. But if dollar weakness becomes more pronounced and global liquidity conditions ease, Bitcoin could regain prominence as a beneficiary asset. In particular, as Bitcoin is viewed as a “dollar alternative” or an asset highly sensitive to global liquidity, changes in the FX environment are likely to become a key driver of price action.

Ultimately, the yen issue is emerging as a macro variable that could shape both Bitcoin’s short-term volatility and its medium-term trajectory, rather than remaining merely an exchange-rate headline. Markets are watching how and with what lag yen strength may be reflected in Bitcoin prices, with the link between monetary policy and crypto once again set to be tested.