Keep Calm and Carry Yen

At the start of the year we published our 2026 Outlook Report in collaboration with Bybit. In that report we highlighted one of the major risks to our macro outlook — “a potential risk-off period in 2026 triggered by violent moves in Japanese government bond yields”, arguing that “the spread between US and Japanese government bond yields is also worth watching in 2026.” The first month of the new year is already showing signs of that volatility in Japanese bond markets, impacting the yield-differential in US-Japan bond yields. How have crypto markets reacted thus far to the current global bond market selloff? Let’s see.

Crypto

Macro

Watch the Spread

The first month of the new year is already showing signs of that volatility in Japanese bond markets, impacting the yield-differential in US-Japan bond yields. How have crypto markets reacted thus far to the current global bond market selloff? Let’s see.

How has crypto reacted so far?

BTC has continued to maintain its correlation to risk-on US equities in the new year, with the 90-day rolling correlation to the S&P 500 and Nasdaq-100 around 40%. On the other hand, its correlation to safe haven precious metals remains low, with both gold and silver concurrently recording new highs.

So far, the move in BTC in response to the rise in JGB yields has been relatively small — BTC followed US equity futures tightly over the extended weekend (MLK holiday on Monday). That relationship continued into early morning today, with equity futures and BTC both falling.

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For now, both assets have sold off but both assets have sold off by a manner consistent with what the linear relationship would suggest, but neither have recorded extreme moves. If anything, at least for now, the major moves have been contained to the respective bond markets of the US and Japan, with a modest spillover to risk sentiment in crypto and US equities.

Despite the big moves in yields and the move manifesting itself in the SPX and BTC, we're not seeing the risk off sentiment in the USDJPY cross-currency basis (a key measure of how much extra people are willing to borrow dollars above the borrowing rate to get dollars via lending yen). Usually this is negative (as traders are willing to pay a premium to get dollars in moments of risk-off sentiment). From the relationship between the two variables over the past three years, the sell-off in BTC is far more extreme than that which is implied by the drop in risk-sentiment as implied by the move in the basis spread.