Bitcoin holds above $80,000, and the US dollar index falls due to suspected yen intervention

Bitcoin rose about 5% during U.S. trading hours to close to US$81,000.

Bitcoin continued its gains during U.S. trading hours, climbing about 5% to close to US$81,000. The rally coincides with renewed volatility in the yen, as investors appear to be reacting to suspected intervention by the Bank of Japan in currency markets and expectations of further interest rate hikes. While Bitcoin rose, the U.S. dollar index (DXY) fell to around 99, and the U.S. dollar/Japanese yen exchange rate fell to 155.4. From historical experience, a weakening of the US dollar is usually beneficial to risky assets including cryptocurrencies, and the recent easing of the weakening of the US dollar has also injected new upward momentum into Bitcoin.

Core Points

Bitcoin rose about 5% to about US$81,000 during U.S. trading hours.

The U.S. dollar fell to 155.4 against the Japanese yen, dragging the U.S. dollar index to around 99.

Polymarket platform shows that the probability of the Bank of Japan leaving interest rates unchanged has dropped sharply from 12% to 1%, indicating that the market is strongly inclined to raise interest rates.

Market pricing shows that the probability of a 25 basis point rate hike on September 18 is as high as 98%.

Concerns about unwinding carry trades have resurfaced, but some traders believe that intervening in foreign exchange markets can help support liquidity.

Strengthening yen, weakening dollar and rising Bitcoin

As of press time, Bitcoin was trading at approximately $81,000, close to recent highs and just a step away from levels earlier this month. This trend is closely related to the development of the foreign exchange market, especially the appreciation of the yen, which market observers believe is related to possible actions by the Bank of Japan. There were reports earlier this week that investors were paying close attention to suspected yen defensive actions, and the subsequent impact was already evident in the data. After the U.S. dollar fell to 158.5 against the Japanese yen on Wednesday, the currency pair dropped further to 155.4. This decline dragged the U.S. dollar index down to about 99, a situation often associated with Bitcoin's good performance.

The key question for traders is whether the weakness of the dollar is a temporary response or part of a broader revaluation. If the dollar continues to weaken, Bitcoin may continue to benefit; if the situation reverses, the catalyst driving this rally may quickly fade.

The signal revealed by the Bank of Japan's interest rate expectations

The trend of the yen has also renewed the market's attention to the Bank of Japan's upcoming policy decisions. Based on Polymarket pricing, the probability of the Bank of Japan leaving interest rates unchanged dropped sharply from 12% to 1%, indicating that traders increasingly believe the Bank of Japan will take action. The Polymarket platform also showed that the probability of the Bank of Japan raising interest rates by 25 basis points at its September 18 meeting is 98%. The shift is significant because it strengthens market expectations of tightening Japan's monetary policy, which could affect global liquidity and capital flows.

Even if interest rate changes themselves are local, their effects may spread outward. Changes in Japan's policy expectations often affect the funding status of traders and funds engaged in yen carry trades, that is, borrowing low-interest currencies to invest in other markets.

The battle between carry trade closure concerns and interpretation of good liquidity

As the US dollar fell rapidly against the yen, some analysts and market participants saw the latest yen defense action as a potential signal of increased risk in carry trade. Some analysts pointed out that without major intervention, it would be difficult to explain that the exchange rate of the US dollar against the Japanese yen fell by nearly 2.5% in 24 hours. The analysis also compares the current situation with the simultaneous intervention and interest rate hikes by the Bank of Japan in the third quarter of 2024.

This perspective is crucial for cryptocurrency investors, as the unwinding of carry trades can tighten global financial conditions and sometimes put pressure on liquidity-sensitive assets. In this case, if risk appetite worsens or the market interprets intervention as a signal of deepening policy urgency, Bitcoin's rally may face resistance.

However, not everyone views intervention purely as a source of stress. There is a view that the Federal Reserve's repo agreement tool with foreign and international monetary authorities can provide Japan with US dollar liquidity collateralized by US Treasury bonds, which may ease the overall liquidity situation. Although the tool does not appear to have been used yet, the U.S. Treasury secretary previously mentioned the possibility at the end of July.

This may lead to divergent market interpretations of the same incident. If intervention supports liquidity, it could boost global risky assets; if it mainly triggers currency risk and forced liquidations, it could have the opposite effect. For now, data such as the strengthening of the yen, the weakening of the US dollar index and the Bank of Japan's expectation of raising interest rates have given a positive boost to Bitcoin at least temporarily.

Bitcoin-related stocks rise simultaneously

Bitcoin's rally is not limited to the cryptocurrency market. Shares of related companies rose 8.6% on Wednesday, participating in a broader recovery in risk appetite. The stock has reportedly risen 70% since its low in late June, but is still down about 10% so far this year.

The rally also extended to the company's permanent preferred stock. As of press time, the preferred stock was trading at approximately $97.80, below its $100 face value-a reminder that exposure to equity-linked cryptocurrencies can fluctuate simultaneously, but also reflects the respective structural pricing dynamics.

It is worth noting that the company previously converted 1,690 bitcoins it held into a US$108.6 million preferred share repurchase.

Looking ahead, traders may be concerned about whether the U.S. dollar/JPY exchange rate continues to decline and whether the U.S. dollar index can hold a low level. Equally important is whether the Bank of Japan's interest rate pricing will remain until September 18, or whether there are new signals that cause the Polymarket platform's probability to shift back to keeping rates unchanged-either change could change the short-term balance of power that drives Bitcoin's next move.