The Bitcoin-Japanese yen (BTC/JPY) pair encountered a notable setback at a critical trendline resistance this Wednesday. This resistance was particularly highlighted as Goldman Sachs (GS) identified the anti-risk yen as the leading hedge against the escalating risks associated with U.S. tariffs and potential recession.
Recent trading data from Japan-based bitFlyer indicated that BTC/JPY fell by 1%, struggling to break past the trendline stemming from its record high achieved on January 20. The situation was mirrored in the cryptocurrency’s pricing in USD, which also reflected losses.
On a broader scale, Asian equity indices and U.S. equity futures exhibited minimal movement as market participants braced for President Donald Trump’s anticipated new “Liberation Day” reciprocal tariffs on Wednesday, an action that has the potential to ignite a global trade war.
The prevailing uncertainty surrounding these tariffs has led several investment banks, including JPMorgan and Goldman Sachs, to elevate their projections for a U.S. recession, predicting a heightened likelihood of consecutive quarterly downturns in the economy.
Crypto observers have suggested that as a reaction to a potential economic downturn driven by tariffs, investors may turn to Bitcoin (BTC) as a safe haven asset. However, Goldman Sachs emphasizes the supremacy of the Japanese yen, historically regarded as a preferred safe haven, in providing protection against U.S. risks.
Kamakshya Trivedi, head of global forex and emerging market strategy at Goldman Sachs, articulated late Tuesday, “The yen offers investors the best currency hedge should the chances of a US recession increase,” as quoted by Bloomberg.
Trivedi further remarked that the yen serves as a “very good hedge” against deteriorating conditions in the U.S. labor market, often performing well when both U.S. real rates (inflation-adjusted yields) and U.S. equities decline simultaneously.
Despite Bitcoin being perceived by many in the crypto community as a digital gold or safe haven asset, it has historically shared market movements with technology stocks. Consequently, a risk-off sentiment stemming from tariff concerns on Wall Street could potentially spill over into the cryptocurrency market.
Moreover, the recent strength of the yen could drive the unwinding of bullish trades financed through inexpensive yen-denominated loans. This could reinforce risk aversion across financial markets, reminiscent of early August last year when a yen carry trade unwind led to a drop in both equities and BTC. During this tumultuous period, Bitcoin plummeted from approximately $65K to $50K within a week.
Goldman Sachs anticipates that the Japanese yen may rise into the low 140s against the U.S. dollar this year, with the USD/JPY pair trading at 149.77 at the time of reporting. This exchange rate is closely linked to the yield differentials between U.S. and Japanese 10-year bonds, the latter of which recently fell to its lowest point since August 2022, signaling potential yen strength.
