BTC shook off Japanese bond yield spikes to stage August recovery

One factor for the growth of BTC is the yen carry trade, which has previously affected the market and triggered the late 2025 price slide. This time around, BTC is recovering despite increasing yields for Japanese bonds. 

Yields on Japanese bonds have continued their upward trek, removing the decades-long carry trade that relied on cheap yen credit. As Cryptopolitan reported, the carry trade worries were one of the factors that weakened BTC at the end of 2025. 

As of August 2026, BTC was trying to defend $77,000, seemingly unaffected by any news of rising yields in Japan. The BTC recovery is still seen as fragile, with relatively weak demand, but it also shows that the carry trade alone is not sufficient to stop crypto growth. 

Yen carry trade slows as all bond yields rise

In the past three months, most yields on Japanese bonds rose with no pause. Unlike earlier hikes, the recent rate rises are more orderly, giving time to funds to adjust. The predictable raises and signals from the Bank of Japan mean there are no short-term liquidations, and traders can adjust their positions. 

The two-year bond yield has risen to 1.86%, the highest level for the past decade. The climb started in 2024, becoming a factor in the crypto market. 

The 10-year bond yield rose to over 3% for the first time since 1996, once again raising the question of easily available liquidity. The 30-year yield continued its expansion to 4.17%, after spending most of the decade with hardly any changes. 

At the same time, the Japanese yen is also weakening, trading around 159 yen per dollar. The currency showed signs of market intervention to support the rate, but sets expectations for further weakness.

While the rising bond yields and weak yen are seen as a negative sign for global markets, in the short term, they are still not a factor for BTC and crypto trading. 

BTC loses connection to Japanese bond yields

BTC can react to rising Japanese yields, especially if traders need to unwind their positions fast. However, the leading cryptocurrency has shown only temporary correlation and has gone through bull markets even as the Bank of Japan became more hawkish. 

The recent BTC rally in August added more than 22% to the coin’s price. Despite this, Santiment data showed the price increase did not correlate with improved sentiment. 

The next trigger for BTC may be the upcoming Bank of Japan meeting on September 17-18. Yen interventions and further yield changes may increase their effect on BTC, especially linked to the bank’s specific statements after the meeting. 

Two days before the Bank of Japan meeting, the US Fed will also issue statements on its monetary policy. The US 10-year bond yield is now at over 4.8%, setting expectations for a 0.25% rate hike on September 15. 

The bond yield narrative may be one of the elements affecting the BTC market recovery. For now, traders are showing signs of greed and increased risk-taking with long positions, but liquidity conditions are still a major headwind factor on a longer time frame. 

BTC has also lost the store of value narrative, where BTC gains cannot compete with bond yields. BTC remains risky and prone to market panics and liquidations, leading to a breakdown of the store of value narrative for short-term holders.

If you're reading this, you’re already ahead. Stay there with our newsletter.