Editor's PiCK
[Analysis] "Possibility of Weakening Yen Strength... Could Be a Short-term Positive for Bitcoin"
Summary
- The weakening of the Japanese yen's strength is analyzed to have a positive impact on risk assets such as Bitcoin.
- Traders' long positions on the yen indicate a possibility of mass liquidation, suggesting a potential reversal to yen weakness.
- Japanese investors' dip-buying demand and the direction of the public pension system could slow down the pace of yen strengthening.

Analysis suggests that the potential weakening of the Japanese yen (JPY) strength could have a positive impact on risk assets, including Bitcoin (BTC), in the short term.
On the 10th (local time), CoinDesk stated that "the yen's strength may pause for a while," adding that this "could have a positive impact on risk asset markets, including stocks and Bitcoin."
CoinDesk explained that the yen's strength has been acting as a negative factor for risk asset markets. The media outlet said, "The yen has been playing a role in supporting global asset prices," and that "the recent strength of the yen likely fueled risk aversion in stock and cryptocurrency markets." It added that "the recent decline in Nasdaq and Bitcoin also coincided with the surge in Japanese bond yields and yen strength," noting that a similar situation occurred in early August last year. Previously, the unwinding of yen carry trades was identified as the cause of the 'Black Monday' incident that occurred on August 5 (KST).
However, recent indicators suggest a possibility of weakening yen strength, according to the explanation. The media outlet stated, "According to US CFTC (Commodity Futures Trading Commission) data, traders took record-high long (buy) positions on the yen last week," adding that "extreme bullish bets increase the likelihood of mass liquidation, making a reversal to yen weakness more probable."
Morgan Stanley's G10 FX Strategy team also expressed a similar view. Morgan Stanley said, "Current speculative positions are excessively bullish on the yen," and that "with strong dip-buying demand from Japanese domestic investors, it's difficult to forecast additional strengthening." They further explained, "Japanese investors are buying foreign assets through Nippon Individual Savings Accounts (NISA), slowing the pace of yen strengthening," adding that "Japan's public pension system also tends to adjust its portfolio in the opposite direction of the market."
The media outlet noted, "In fact, when the yen showed rapid strengthening last August and risk asset markets plummeted, the above scenario helped slow down the strengthening," predicting that "if this pattern repeats, buying sentiment for Nasdaq and Bitcoin will strengthen again."
However, the weakening of yen strength acts as a short-term positive for risk asset markets. The media outlet stated, "The long-term outlook for yen strengthening still remains," adding that "the difference between US and Japanese 10-year bond yields (2.68%) is at its lowest level since August 2022." It concluded by saying, "Risk asset investors should monitor the volatility of the yen's value."

Son Min
sonmin@bloomingbit.ioHello I’m Son Min, a journalist at BloomingBit



