Bitcoin has remained above $78,000 despite a sharp rally in the Japanese yen, marking a different market reaction from the carry trade unwind that hit crypto hard in August 2024.

USD/JPY fell from 160.39 to about 154.50 over three trading sessions, representing a roughly 3.7% strengthening of the yen. The move followed nearly $100 billion in Japanese currency intervention during August and renewed expectations that the Bank of Japan (BOJ) could continue raising interest rates.

A rapidly strengthening yen can threaten global risk markets because investors have historically borrowed cheaply in yen to finance positions in higher-yielding assets. When those trades unwind quickly, investors may be forced to sell risk assets to repay yen-denominated funding.

Bitcoin fell as much as 20% during a similar episode in August 2024. This time, BTC has absorbed the yen move without experiencing the same level of forced selling.

Bitcoin Reacts Differently From the 2024 Yen Shock

The contrast with August 2024 is one of the most notable parts of the latest currency move.

During the 2024 episode, a rapid appreciation of the yen triggered an unwind of yen-funded carry trades across global markets. Bitcoin and Ethereum fell as much as 20% as investors reduced leveraged risk exposure.

In the latest move, the yen strengthened by about 3.7% over three sessions, but Bitcoin continued trading near $78,000.

Table 1. Bitcoin Reaction to Yen Strength in 2024 and 2026

Notably, the comparison does not mean Bitcoin is immune to another carry trade unwind. The speed of the yen’s move remains important because a more violent rally could put greater pressure on leveraged positions.

Why a Stronger Yen Matters for Bitcoin

The yen has historically been one of the main funding currencies for global carry trades because Japanese interest rates remained extremely low for decades.

Investors could borrow yen cheaply, convert it into another currency, and invest the proceeds in assets offering higher returns. Those positions can include bonds, equities and other risk assets.

The trade becomes more difficult when Japanese interest rates rise, or the yen strengthens sharply. Investors borrowing in yen then face higher repayment costs, which can encourage them to close positions.

Japanese two-year government bond yields recently reached 1.746%, their highest level in more than 31 years, while the yield gap between the U.S. and Japan narrowed to about 2.64 percentage points.

That reduces some of the financial incentive behind borrowing yen to fund investments elsewhere.

Yen Strength Is Also Weakening the US Dollar

As the yen strengthened in early September, the US Dollar Index (DXY) fell more than 0.5% and moved below 99. Bitcoin climbed above $78,000-$79,000 during the same session.

A weaker dollar can support Bitcoin because BTC is priced globally against the U.S. currency and often benefits when financial conditions become less supportive of the dollar.

That creates an unusual short-term dynamic. A moderate yen rally can weaken the dollar and support Bitcoin. But if the yen strengthens too quickly, it can trigger carry trade deleveraging and create selling pressure across risk markets.

Table 2. How Yen Strength Could Affect Bitcoin

The latest price action suggests Bitcoin has so far benefited more from dollar weakness than it has suffered from carry trade deleveraging.

Japan Spent Nearly $100B Supporting the Yen

Japan’s foreign reserves fell by $94.6 billion in August to approximately $995 billion. Foreign securities declined by $87.8 billion, suggesting that securities were sold as part of efforts to fund currency intervention.

The scale raises questions about how aggressively Japan can continue intervening if yen volatility returns.

Japan Research Institute economist Akira Nishimura said Japan still has capacity to intervene because of the securities it holds, but additional sales of US Treasuries could create political pressure from Washington.

BOJ Rate Hikes Remain the Bigger Risk

Japan’s long-term bond yields have already risen sharply, with the 10-year yield recently reaching 3% for the first time since 1996 and the 30-year yield approaching historical highs.

Market pricing cited by HSBC points to around 75 basis points of cumulative BOJ rate increases by April 2027.

Higher Japanese rates would narrow the gap between Japanese yields and those available overseas, further reducing the appeal of yen-funded carry trades.

For Bitcoin, the key issue may therefore be less about whether the yen strengthens and more about how quickly the move happens.

What Comes Next

Bitcoin has passed the first major test from the latest yen rally, but the risk has not disappeared.

A gradual appreciation of the yen could continue weakening the dollar and provide support for BTC. A much faster move, particularly alongside aggressive BOJ tightening, could force more leveraged carry trades to unwind.

Bitcoin’s ability to remain near $79,000 while the yen gained about 3.7% in three sessions shows a stronger response than during the 2024 episode. The next test will be whether that resilience continues if Japanese rates rise further or the yen makes another sharp move.

What this means for you: A stronger yen is not automatically bearish for Bitcoin. So far, dollar weakness has helped BTC, but a faster yen rally could revive the carry trade risks that caused heavy crypto selling in 2024.