#YenHits40YearLow

💴 The Yen Just Hit Its Lowest Level Since 1986.. Even a BOJ Rate Hike Couldn't Stop the Slide

This is a big deal happening right now. It is connected to Bitcoins performance in Q2. I want to explain it all to you.

* The yen fell below 162 per dollar today. That is the weakest it has been since December 1986 40 years ago.

The Bank of Japan raised interest rates to 1% in June to try to help the currency. They also bought yen directly in the market.. The yen kept falling.

When a central bank uses its tools and the currency still hits a 40-year low something big is going on. That something is the difference in interest rates between the US and Japan. The Fed has rates near 5%. Inflation is high. Japans rate is much lower after the hike. So people borrow yen and invest in higher-yielding dollar assets. That keeps the yen weak.

Every time the Fed stays tough on rates the gap gets bigger. That means more people sell yen. The Bank of Japan can try to help. It does not change the main problem until the rate gap gets smaller.

Here is how it affects Bitcoin. A study found that Bitcoins price and the USD/JPY exchange rate have a negative connection. When the yen weakens and the dollar strengthens Bitcoin falls. This happens because of the carry trade. Japanese investors borrow yen to invest in dollar assets. That keeps the dollar strong and the yen weak. A strong dollar makes Bitcoin more expensive in yen so Japanese people buy less.

Bitcoin had a Q2, down 20%. The USD/JPY chart and the BTC chart for the period look similar. That is not a coincidence. It is how the carry trade works.

The important thing to watch is when this carry trade unwinds. It always does. When the Fed signals rate cuts or US inflation goes down it happens fast. When it unwinds it affects all assets at the time. For Bitcoin a big yen change could be a recovery catalyst. It could make the dollar weaker. People more willing to take risks.

Watch USD/JPY and BTC/USD closely. They are telling the story.

With USD/JPY at a 40-year high and Bitcoin showing a connection, to yen weakness. Do you think the BOJ finds a way to help Bitcoin recover or does the US-Japan rate gap keep crypto under pressure?

‍#GateSquare #MacroCrypto @Gate_Square