Japan's Bond Yields Are Negatively Affecting Bitcoin

The increase in Japan's government bond yields to the highest level in 17 years is putting significant pressure on global bond markets and risk assets. At the forefront of this situation is the sharp rise in Japanese government bond interest rates. Rising interest rates are causing investors to exit risky assets, which has a negative effect on the price of Bitcoin.

On Wednesday morning, Japan's 10-year government bond yield rose to 1.70%, marking its highest level since July 2008. Meanwhile, the 30-year bond yield briefly reached 3.34%. This increase is viewed as a side effect of the government's expansionary Abenomics policies aimed at supporting growth. Goldman Sachs forecasts that this Japan-driven rise in interest rates could also push bond yields higher in developed countries like the U.S., Germany, and the UK.

These developments in Japan pose a risk, particularly for Bitcoin investors. Rising bond yields are leading investors to seek safe havens, resulting in increased selling pressure on Bitcoin. Furthermore, the Dollar Index (DXY) has surged to its highest level in two months, indicating global financial tightening. The Japanese yen has depreciated by 3.5% against the Dollar since Friday. This weakening has deepened following Prime Minister Sanae Takaichi's reiteration of commitment to the low-interest-rate friendly Abenomics policies.

Typically correlated with technology stocks, Bitcoin has lost value during this period, while gold prices have risen above $4,000, benefiting from the demand for safe havens. Rising Dollar and bond yields may limit the upward potential of Bitcoin in the short term. Critical levels that investors should pay attention to play an important role in determining Bitcoin's trend of either decline or ascent.