Bitcoin and Nasdaq May Stabilize as Yen Betting Is Overheated
Date: 2025-03-11 Author: Oliver Abernathy Categories: CRYPTO PAYMENTS
The declines in the Nasdaq and Bitcoin (BTC) in recent days have been surprisingly in sync with a sharp rise in Japanese government bond yields and a stronger Japanese yen (JPY), reminiscent of early August last year. There may be a causal relationship, as the low-yielding yen has supported global assets for decades. The continued rise in the Japanese yen may have played a role in the recent decline in risk assets on Wall Street and in the crypto market.
Speculators’ Japanese yen positions hit a record high last week, according to CFTC data quoted by MacroMicro, indicating that bullish betting is overheated. Such overconfidence in the asset’s continued growth could lead to disappointment, followed by a mass unwinding of long positions, which would lead to a rapid reversal downside.
In other words, the yen’s rise could stall, which would support risk assets such as the Nasdaq and Bitcoin. In a note to clients, Morgan Stanley’s G10 FX Strategy team expressed caution about further yen appreciation, given the overload of speculative positions and high buying activity from Japanese investors.
Many Japanese investors use the Nippon Individual Savings Account (NISA) to buy foreign assets during risk-off periods, which indirectly slows the pace of yen appreciation. In addition, the Japanese pension system usually acts counter-trend by redirecting assets from the yen to other currencies. This was already seen in August last year after the yen strengthened sharply and stocks sold off.
There is a chance that the current situation will repeat last year, which will lead to a rise in sentiment in risk assets such as the Nasdaq and Bitcoin. Following the USD/JPY decline in July and early August to 140, the yen has strengthened to 158.50 by January, and BTC has recovered from its August decline to reach an all-time high above $108,000.
At press time, Bitcoin was trading around $80,300, down 5% since the start of the month, continuing a 17.6% decline in February. The price fell to $76,800 in morning trading on Tuesday. Meanwhile, USD/JPY was at 147.23, after hitting a five-month low of 145.53 the day before.
However, despite the overheated positions and institutional flows suggesting possible relief, these factors are unlikely to change the long-term bullish trend for the yen, supported by the narrowing yield differential between the US and Japanese bonds. Therefore, risk investors should remain alert to signs of volatility in the yen and other financial markets.
The widening of the yield differential between the US and Japanese 10-year government bonds is narrowing to 2.68%, the lowest since August 2022. This also points to a possible continuation of the bullish trend for the yen.
