Key facts
- Bitcoin traded above $60,000 as traders reduced expectations of a July Federal Reserve rate hike.
- The Japanese yen saw a significant strengthening, rising to 153.95 against the U.S. dollar.
- Speculation arose that the Bank of Japan, possibly in coordination with the U.S. Federal Reserve, may have intervened to support the yen.
- The yen's surge is linked to concerns about unwinding the global "carry trade," which could impact liquidity for risk assets.
- A potential U.S. dollar supply expansion to backstop the yen could have significant long-term bullish implications for Bitcoin.
Bitcoin held steady above the $60,000 mark during European trading hours on Thursday, as market participants adjusted their expectations following comments from Federal Reserve Chair Kevin Warsh suggesting that inflation risks have eased. This sentiment shift led traders to largely price out the possibility of a Fed interest rate hike in July.
In currency markets, the Japanese yen experienced a notable strengthening, climbing to 161.20 against the U.S. dollar from a recent low of 162.84. This sudden appreciation triggered speculation that the Bank of Japan might have intervened in the market to bolster its weakening currency. Despite the Bank of Japan's recent decision to raise its interest rate to 1%, the yen has continued to decline against the dollar, which remains attractive due to U.S. interest rates standing at 3.5%.
Further developments indicated that the New York Fed conducted "rate checks" on Friday, a procedural step often preceding market intervention, potentially signaling a coordinated effort between the U.S. and Japan to support the yen. This led to a significant surge in the yen, which climbed 3.39% from its previous week's low to trade at 153.95 yen to the dollar, a level not seen since early November 2025.
The strengthening yen poses a threat to the global "carry trade," a long-standing investment strategy where investors borrow low-interest yen to invest in higher-yielding assets abroad, including U.S. stocks and Bitcoin. A forced unwinding of these leveraged positions could create selling pressure on risk assets. Tim Sun, senior researcher at HashKey Group, noted that rising expectations of intervention increase the cost of holding leveraged positions, forcing capital out of assets like Bitcoin. This dynamic has been observed in recent selling across crypto and equities as the yen strengthened.
While this deleveraging presents a short-term challenge for Bitcoin's price, some experts suggest that the longer-term monetary consequences of a potential intervention could be bullish. If the Fed intervenes by selling dollars, it could effectively increase dollar liquidity, weakening the U.S. dollar and boosting global liquidity. Arthur Hayes predicts that such a scenario, where the U.S. dollar supply is expanded to backstop the yen, could push Bitcoin to $200,000 by March 2026.