Bitcoin Just Survived the Yen Shock That Crushed Crypto 2 Years Ago

Japan intervened heavily in the foreign‑exchange market in August, spending close to $100 billion in an effort to lift the yen. Despite the effort, the yen did not reach the 154 per dollar level until market participants drove it there, with USD/JPY falling from 160.39 to 154.50 in three sessions – a 3.7% appreciation.

Why the Yen Move Matters for Crypto

A similar yen rally in August 2024 forced investors to unwind yen‑funded positions, leading to a sharp sell‑off in risk assets, including Bitcoin and Ethereum, which fell as much as 20 % at the time. The current yen strength provides a stress test for the crypto market, but Bitcoin has remained above $79,000, near its highest level since May.

Japan’s Intervention Costs

The Ministry of Finance disclosed that Japan’s foreign‑reserve holdings fell by $94.6 billion in August, ending the month at $995 billion. The decline was driven largely by a $87.8 billion drop in foreign securities, indicating that short‑dated U.S. Treasuries were sold to fund the yen defence.

Implications for Future Policy

Analysts note that further yen‑supporting sales of U.S. Treasuries could attract pressure from Washington, potentially limiting Japan’s ability to intervene again. The burden may shift to the Bank of Japan, which is expected to continue raising rates, with markets pricing around 75 basis points of cumulative hikes by April 2027. A quarter‑point increase next week would bring rates to 1.25 %.

Outlook

Bitcoin’s resilience above $79,000 suggests it has withstood the initial yen shock that hurt crypto two years ago. However, a more rapid or larger yen appreciation could pose a renewed test for the market.