Bitcoin's 52-week correlation with USD/JPY hits -0.90, undercutting 'carry trade' theory
Data shows a strong -0.90 correlation between Bitcoin and the USD/JPY currency pair, suggesting that Bitcoin and the Japanese yen have recently moved in tandem against the dollar. This trend challenges the traditional 'yen carry trade' theory, which typically assumes that a weakening yen supports risk assets like cryptocurrency.
Why it matters
Understanding this shift in correlation is critical for institutional investors and traders who rely on historical carry trade models to predict market volatility and risk asset performance.
The 52-week rolling correlation coefficient between Coinbase's BTC/USD pair and the USD/JPY pair from the currency markets now stands at -0.90, according to data source TradingView. That's the most negative reading since late 2022. Squaring that figure gives an R2 of about 0.81, meaning roughly 81% of the weekly variation in BTC/USD can be statistically explained by movements in USD/JPY.
The article provides a technical analysis of market data and financial theories without taking a stance on the future direction of the assets.
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