The USD/JPY hits a one-year high of 158.25. What does this mean for the crypto market?

The US dollar rose to 158.25 against the Japanese yen, reaching its highest level in a year. Behind this seemingly simple exchange rate news, it reflects significant changes in global macro liquidity, which are profoundly affecting the performance of crypto assets led by Bitcoin and investors’ risk appetite.

Background of the US Dollar Appreciation

The continuous strengthening of the US dollar against the yen, reaching a one-year high, is the result of multiple factors. The relative resilience of the US economy, sustained high federal funds rates, and the Bank of Japan’s relatively loose monetary policy all support the dollar’s appreciation. When the dollar appreciates, it means the dollar is more valuable relative to other currencies, and global investors tend to hold dollar assets rather than assets in other currencies.

Why the Yen’s Depreciation is Worth Noting

As a safe-haven currency, the yen’s depreciation often reflects an increased global risk appetite. However, yen depreciation also means higher overseas investment costs for Japanese investors. Market observations suggest that Japanese retail and institutional investors engaging in “Yen Carry Trades” may face adjustment pressures. This adjustment could lead to a reallocation of global capital flows.

Impact Pathways on the Crypto Market

The Dual Effects of US Dollar Appreciation

The impact of dollar appreciation on the crypto market is relatively complex. On one hand, dollar appreciation usually puts risk assets under pressure. Cryptocurrencies like Bitcoin, as high-risk assets, tend to be pressured in an environment of rising dollar and declining risk appetite among investors. On the other hand, dollar appreciation may also reflect a strong US economy, which could support risk assets.

Concerns Over Liquidity Contraction

Dollar appreciation often accompanies a relative contraction of global liquidity. When the dollar appreciates, dollar-denominated assets become relatively cheaper, but investors in other currencies need more local currency to purchase these assets. This could reduce the purchasing power of non-dollar investors for crypto assets, thereby affecting market demand.

Changes in Interest Rate Expectations

Dollar appreciation typically reflects market expectations of US interest rate trends. If dollar appreciation indicates expectations of sustained high US interest rates, then holding dollar assets becomes more attractive compared to zero-yield Bitcoin, potentially diverting some funds.

Responses from Market Participants

Future Focus Points

The continued appreciation of the USD/JPY warrants close attention, especially to the following aspects:

• FOMC’s upcoming interest rate policy signals
• Whether the Bank of Japan will adjust monetary policy to support the yen
• Performance of global stock markets, especially risk assets
• Capital inflows and outflows in the crypto market

Summary

The dollar reaching a one-year high reflects significant changes in the global macro environment. In an environment of dollar appreciation and relative contraction of global liquidity, the crypto market may face short-term pressure. However, this does not necessarily indicate a change in the long-term trend; key factors include the Fed’s policy direction and the development of the global economic fundamentals. For crypto investors, in such a macro context, it is crucial to closely monitor the dollar index, interest rate expectations, and the linkage with global risk assets.