Bitcoin's Dollar-Yen Correlation Hits Record Low, Undercuts Carry Trade Theory

The correlation between Bitcoin's price and the dollar-yen exchange rate has hit an unusually strong negative 52-week reading of -0.90, undercutting the 'carry trade' theory that suggests a strengthening yen should trigger risk aversion in the crypto market.

A 52-week rolling correlation coefficient of -0.90 between Bitcoin's price on Coinbase and the dollar-yen pair indicates that about 81% of its weekly moves correspond to shifts in USD/JPY, with BTC tending to fall when the yen weakens.

This implies that a strengthening yen may not necessarily lead to risk aversion in cryptocurrencies, as the carry-trade theory would predict. In fact, any BOJ action and resulting rise in the yen could potentially cut off Bitcoin's decline.