The Bitcoin-Japanese yen (BTC/JPY) pair encountered a challenge at a crucial trendline resistance on Wednesday, as a notable investment bank identified the Japanese yen as the primary safeguard against escalating U.S. tariff and recession concerns.
Trading data from the Japan-based bitFlyer indicated a 1% drop in BTC/JPY following its inability to breach the trendline established from the record high achieved on January 20, according to insights from a popular charting platform.
Similarly, BTC’s price in U.S. dollars experienced equivalent declines. Meanwhile, equity indices in Asia and U.S. futures remained stable as they awaited President Donald Trump’s impending new “Liberation Day” reciprocal tariffs on Wednesday, which have the potential to ignite a global trade conflict.
The uncertainty surrounding tariffs has led several financial institutions to foresee an increased likelihood of a U.S. recession or consecutive quarterly declines in economic growth.
Some cryptocurrency analysts predict that if an economic downturn spurred by tariffs occurs, investors may consider Bitcoin (BTC) a safe-haven asset. However, the aforementioned firm argues that the Japanese yen, traditionally viewed as a safe haven, remains the foremost hedge against U.S. risks.
“The yen provides the best currency protection for investors if the likelihood of a U.S. recession rises,” stated the head of global foreign exchange and emerging markets strategy at the investment bank, as reported on Tuesday.
This expert further noted that the yen serves as an “excellent hedge” against U.S. labor market weaknesses and typically performs best when both U.S. real rates (inflation-adjusted yields) and U.S. stock prices decline concurrently.
Although Bitcoin is broadly regarded as a form of digital gold or a safe-haven asset by participants in the cryptocurrency market, it has historically followed the movements of tech stocks. Thus, any risk-off sentiment on Wall Street due to tariffs could resonate within the crypto market as well.
Moreover, a stronger yen may lead to the unwinding of bullish trades that are backed by low-cost yen-denominated loans, amplifying overall risk aversion in financial markets. The crypto market witnessed such a phenomenon in early August of the previous year when the yen carry trade fell apart, causing declines in both stocks and Bitcoin. During that time, Bitcoin plummeted from nearly $65K to $50K in just a week.
The investment bank anticipates that the Japanese yen will strengthen to the low 140s against the U.S. dollar this year. As of the latest update, the USD/JPY pair was trading at 149.77. This exchange rate is known to closely track the yield differential between 10-year U.S. and Japanese bonds.
The Japanese bond yield recently fell to its lowest point since August 2022, presenting favorable signals for the yen.
