If the Federal Reserve intervenes in the yen, will Bitcoin usher in a new bull market?

The Japanese yen recently experienced its strongest single-day rebound in nearly six months, with the USD/JPY exchange rate plunging from near 160 to 155.6. The market has keenly sensed that this may not be just an ordinary market fluctuation. Japanese Prime Minister Sanae Sato has issued warnings about the “abnormal” volatility of the yen. Additionally, Bloomberg reports that the New York Federal Reserve has begun inquiring with major banks regarding the yen exchange rate issue, a move often seen as a precursor to coordinated foreign exchange intervention.

Intervention Signals

Global financial markets are closely watching the sharp fluctuations in the yen exchange rate. Recently, the USD/JPY rate showed its strongest single-day movement in nearly six months, sparking widespread speculation that Japanese authorities might intervene in the foreign exchange market. A key signal comes from the New York Federal Reserve, which has inquired with major banks about the yen rate, interpreted by the market as a sign of potential coordinated foreign exchange action.

BitMEX co-founder Arthur Hayes has made a notable comment on this event. He believes that if the Federal Reserve actually takes action by creating bank reserves to sell dollars and buy yen to support the yen, it would be “extremely bullish” for Bitcoin. Market concerns mainly focus on the fact that short yen positions have reached a ten-year high; if the yen weakens further, it could trigger market turbulence.

Liquidity Transmission

Why would a seemingly distant foreign exchange intervention be connected to Bitcoin’s price? The answer lies in global capital flows and the Federal Reserve’s balance sheet.

Arthur Hayes points out that the key is to observe the “Foreign Currency Denominated Assets” item in the weekly Federal Reserve H.4.1 report. A sharp increase in this item suggests that the Fed may be injecting dollar liquidity into the market through mechanisms like currency swaps. Hayes calls this “Invisible Quantitative Easing.” Unlike traditional QE with public statements, this liquidity released via foreign exchange interventions is “invisible,” but its effect is the same—injecting new dollars into the global financial system.

The logical chain is: Fed creates bank reserves → sells dollars and buys yen to support the exchange rate → new dollars enter the global financial system → increased liquidity may push up the prices of various risk assets, including cryptocurrencies.

Market Correlation

Historical experience provides a reference for understanding the current situation. Looking back at the Plaza Accord of 1985 and joint interventions during the 1998 Asian financial crisis, successful coordinated actions not only stabilized the yen and weakened the dollar but also often boosted global asset prices. Analysts warn that uncoordinated unilateral interventions could force the Bank of Japan to sell U.S. Treasuries to obtain dollars, potentially destabilizing the global bond market.

From a market correlation perspective, Bitcoin shows a significant positive correlation with the yen and often a negative correlation with the dollar. Therefore, a potential weakening of the dollar could create conditions for a major revaluation of cryptocurrency prices. Of course, this is not without risks. In the short term, if the yen rapidly strengthens under official intervention, leveraged positions borrowed in low-interest yen to invest in high-yield risk assets (i.e., “yen carry trades”) could be squeezed, potentially triggering deleveraging and temporarily dragging down stocks and assets like Bitcoin.

Price Outlook

In early 2026, amid frequent global macroeconomic events, the Bitcoin market itself is at a critical observation point. According to Gate data, as of January 26, 2026, Bitcoin (BTC) is priced at $87,692.4, with a slight fluctuation of -0.25% over the past 24 hours. Looking at a longer timeframe, the market shows a complex pattern: Bitcoin has fallen -6.21% over the past 7 days but still maintains a +3.19% increase over the past 30 days. Its market cap is currently $1.79 trillion, accounting for 56.48% of the entire cryptocurrency market.

High uncertainty is a prominent feature of the current market. Options market pricing indicates that there are significant disagreements about Bitcoin’s trajectory by the end of 2026, with probabilities of falling to $50,000 or rising to $250,000 being equally plausible.

Galaxy Digital research head Alex Thorn notes that the continued expansion of institutional access, gradually easing monetary policies, and demand for non-dollar hedged assets could collectively drive Bitcoin to be widely accepted like gold within the next two years.

Japanese Narrative

Understanding the linkage between the yen and Bitcoin cannot ignore Japan’s rapid development of its cryptocurrency market. This traditional financial powerhouse is playing an increasingly active role in the digital asset space. Japan has approved the issuance of its first yen (JPY) stablecoin, which will help stabilize JPY trading pairs and reduce volatility. Additionally, starting in 2026, Japan will implement a unified tax rate on crypto gains, which is expected to simplify the tax structure and encourage more market participation.

Japanese listed company MetaPlanet continues to increase its Bitcoin holdings, similar to MicroStrategy, highlighting a trend of institutional adoption. Market participants should pay close attention to liquidity changes in the BTC/JPY trading pair and the potential capital inflows from local Bitcoin ETFs. These domestic developments, intertwined with global macro events, make Japan a key node connecting traditional forex markets and the cryptocurrency market.

As markets hold their breath awaiting the next update of the “Foreign Currency Denominated Assets” item in the Fed’s H.4.1 report, Bitcoin’s price remains narrowly range-bound between $86,100 and $89,185.2 over a 24-hour period. Some analysts look further ahead to 2031, predicting Bitcoin could reach $271,045.28. Regardless of short-term volatility, the maturity and institutional adoption of the crypto market are continuously increasing. Global capital flows—whether from funds returning from the Japanese bond market or seeking non-sovereign safe havens—are reshaping Bitcoin’s narrative of value in an invisible way.