Bitcoin dances on a thin line as Japan and US policies clash

At the same time, Guilherme Tavares, chief executive of i3 Invest, sees the combination of rising Japanese yields and Bitcoins resilience as a caution signal.

He said:

“Liquidity has been crucial lately. With long term yields so high in Japan, risky assets are finally starting to show more weakness.”

He pointed out that the correlation between Japanese 40-year bonds and Bitcoin has recently fallen to extreme lows, suggesting the asset is losing one of its key macro supports.

Macro stalemate

Even so, Bitcoin has so far refused to break materially lower, holding above $84,000 intraday. Timothy Misir, head of research at BRN, told that the standoff was a “macro stalemate.”

According to Misir, the conflicting signals are pinning markets in place. Notably, the US headline inflation slowed to 2.7%, giving the Fed room to discuss easing. At the same time, the BoJ is inching rates higher from the zero bound.

Due to this, he noted:

“US data argues for easing. Japan just tightened. Crypto is caught in between.”

So, he characterized the recent price action as “positioning stress” rather than fundamental capitulation, with traders adjusting exposures rather than abandoning the asset class.

Long-term view

Despite the relative uncertainty in the market, some veteran observers see the latest move as a waypoint rather than an outright regime break.

Arthur Hayes, co-founder of BitMEX, argues the BoJ remains constrained by its own balance sheet and Japans debt load.

Despite the hike to 0.75%, he noted that the Asian countrys inflation is still higher, leaving real rates in negative territory. Hayes sees that as a deliberate feature of policy rather than an accident.

“Dont fight the BoJ: negative real rates is the explicit policy,” he wrote, predicting a weaker yen over time and higher Bitcoin prices as investors seek protection from currency debasement.

Hayes bullish chain runs indirectly through fixed-income markets because Japanese insurers are unlikely to allocate to Bitcoin directly.

However, if, as Krueger suggested, they pull back from hedged US Treasuries because currency protection has become too costly, the Fed may eventually have to absorb more supply and suppress yields.

Consequently, the fresh balance-sheet expansion aimed at stabilizing sovereign debt would result to higher Bitcoin prices.