- Nasdaq and BTC crashed amid increase in Japanese government bond yields.
- A similar pattern was seen last year when the USD/JPY pair rebounded following its decline to 140.
- Nasdaq and Bitcoin could regain strength if money is rotated from JPY to risk assets.
Nasdaq and Bitcoin (BTC) both got hammered in recent weeks, just as Japanese government bond yields climbed and the Japanese yen (JPY), often seen as a safe haven, gained strength.
This market action looks a lot like what happened in early August, raising the question of whether we’ll see a similar outcome. Historically, the low-yielding yen has been a source of support for global asset prices, so its recent jump could be behind the latest wave of risk aversion hitting both crypto and stock markets.
Yen Rally Looks “Too Far, Too Fast”
However, this bullish run for the Japanese yen might be overdone. Data from the Commodity Futures Trading Commission (CFTTC), tracked by MacroMicro, shows that bets for the yen (speculative long positions) hit a record high last week.
Often, when everyone piles on one side of a trade, it sets up a reversal. Traders start closing out those crowded positions, and that can cause a quick drop in the asset’s price.
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This suggests the yen’s upward climb might be losing steam, which could be good news for riskier assets like Bitcoin and the Nasdaq. Morgan Stanley’s G10 FX Strategy team said something similar late Friday, warning against expecting more yen strength. They pointed to the “stretched” bets on the yen and strong interest from Japanese investors to buy on dips.
Japanese Investors May Limit Yen’s Rise
The team explained that many Japanese investors use the Nippon Individual Savings Account (NISA) to buy foreign assets when markets get shaky, which can slow down the yen’s rise. Plus, Japan’s public pension system tends to push back against market trends by selling yen-denominated assets when the yen gets too strong.
“Indeed, such a scenario occurred last August after a sharp appreciation of the JPY and a pronounced sell-off in equities,” strategists noted.
If history does repeat itself, Nasdaq and Bitcoin could bounce back as traders dump yen and jump back into risk assets.
History Suggests Rebound for Bitcoin, Nasdaq: Analysis
As of now, Bitcoin trades at $80,945.10, down slightly – 0.41% – in the last 24 hours. However, trading volume has skyrocketed, up 50.78% to $60 billion, showing a lot more activity in the market.
Technical Analysis Hints at Potential Bitcoin Bounce
Looking at the chart below, the Bollinger Bands (BB) indicate Bitcoin is testing the lower band. This often suggests an asset is oversold. The 20-day Exponential Moving Average (EMA), around $87.7K, could act as resistance if BTC tries to rebound.
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But, if Bitcoin breaks decisively above this EMA, it could make a run towards the upper Bollinger Band limit, near $99.5K.
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