The potential intervention by the Federal Reserve (Fed) in the US-Japan currency market could have significant implications for the price of Bitcoin in 2026. Recent reports indicate that US officials have conducted dollar-yen rate checks, a preliminary step often taken before direct market intervention. While these checks do not guarantee action, they serve as an indication that authorities may be considering a response to stabilize the Japanese yen.
Impact of Coordinated Action on Bitcoin
Should the US decide to sell dollars and purchase yen, it would be aimed at stabilizing Japan’s currency. Historically, Japan has attempted to defend the yen alone, resulting in temporary relief from its decline but ultimately leading to further depreciation. A coordinated intervention, however, could yield different results. According to cryptocurrency analyst AliCharts, past events like the 1985 Plaza Accord and the 1998 Asian currency crisis demonstrate that joint actions can send a powerful message to the markets.
A weaker US dollar typically shifts capital towards alternative assets, including Bitcoin. The cryptocurrency has shown a tendency to move inversely to the dollar, prompting traders to closely monitor the situation. The potential for a stronger yen, however, poses risks that traders should consider.
The Yen Carry Trade and Its Risks
A significant amount of global capital is associated with the yen carry trade, where investors leverage low-interest yen to invest in higher-risk assets like cryptocurrencies. A rapid strengthening of the yen could lead to a unwinding of these positions, forcing investors to sell assets to cover their losses. This scenario unfolded in mid-2024 when an unexpected rate hike by the Bank of Japan resulted in a surge in the yen’s value, leading to a sharp decline in Bitcoin’s price.
AliCharts cautioned that while a weaker dollar might benefit Bitcoin in the long run, short-term fluctuations in yen strength could exert downward pressure on the cryptocurrency market.
Former BitMEX CEO Arthur Hayes echoed similar sentiments, suggesting that the current setup could create a “very bullish” environment for Bitcoin if it results in increased dollar liquidity. He urged investors to keep an eye on the Fed’s weekly H.4.1 report for indications of balance sheet expansion. Presently, there has been no expansion, with the Fed’s balance sheet remaining at approximately $6.58 trillion and contracting by about $75 billion each month.
As of now, Bitcoin is trading around $87,706, while the USD/JPY exchange rate fluctuates between 153 and 155. The market will continue to react to developments surrounding US monetary policy and its impact on global currencies, especially as the situation evolves in the coming months.
