Last night Bitcoin sold off as the Japanese Yen (JPY) appreciated. But does the yen carry trade really matter for Bitcoin? The logic behind it: Borrow in low-rate yen, invest in higher-yielding assets, Treasuries, equities, Bitcoin, etc. When the yen strengthens sharply, positions unwind, investors sell those assets to repay yen loans, creating selling pressure, while creating demand for yen. The latest move fits the theory, but does this relationship hold up over time? Let's look at the numbers: At the median, Bitcoin does tend to decline after large JPY spikes post-2023, but there is a strong dispersion and the result is not statistically significant (pre-2023 the relationship is even noisier). Even conditioning those events on volatility, geopolitical risk, and market regimes does not sharpen the picture. The closest thing to a signal is a weak tendency for a brief 1-2 day dip following larger JPY moves post-2023, but even that falls short of statistical significance and is an unreliable signal in itself. Looking at individual episodes makes clear why: Two examples: March 2023: In the wake of the Silicon Valley Bank collapse on Friday, on Monday JPY appreciated and Bitcoin surged +8% amid narrative of Bitcoin as an alternative to the banking system. August 2024: JPY appreciated on an unexpected BOJ rate hike. Bitcoin crashed 16% over the following days as carry trades were forcibly unwound. Same signal, opposite outcomes. The JPY can strengthen because of a BOJ surprise, a banking crisis, geopolitical stress, or general risk-off, each with a completely different implication for Bitcoin. So why did Bitcoin and JPY move as expected last night? The last few days saw macro uncertainty building on multiple fronts: tariffs, a potential imminent US strike on Iran, and the assassination of Mexican cartel leader "El Mencho." The Yen appreciating may have just been the last tipping point. The carry channel has merit. But whether it dominates Bitcoin's price action depends on why the Yen is moving and what other forces are at play. In the end, not all Yen appreciations are equal.(Dr. Jan Wüstenfeld)