The price of Bitcoin (BTC) is at a critical juncture, facing a liquidity crunch and heightened selling pressure as its correlation with the Japanese Yen hits a record high. After rebounding to around $94,400 earlier in the week, BTC price was rejected and fell below $91,000 on January 7, 2026. Analysts attribute this pressure to the unwinding of the Yen carry trade, a strategy where investors borrow low-interest Yen to invest in higher-yielding assets like crypto.
The Bank of Japan's recent interest rate hike to 0.75% has made Yen loans less profitable, forcing a global risk-off shift. This has led to liquidity outflows from Bitcoin and altcoins as investors repay Yen-denominated loans. The strain is visible in the market, with U.S. spot Bitcoin ETFs seeing $243 million in cash outflows, according to data cited in the report.
Market sentiment remains subdued, with the Crypto Fear & Greed Index lingering in "Fear" territory. Despite a strong start to the year with $925.3 million in net inflows for spot Bitcoin ETFs over the first three trading days of 2026, capital inflows have since dried up. CryptoQuant CEO Ki Young Ju noted that investor interest has shifted back to "stocks and shiny rocks" like gold and silver, leading him to forecast a "boring sideways" grind for Bitcoin in the coming months, countering historical seasonal trends of strong gains in February and March.
Other prominent voices offer a mixed outlook. While veteran trader Peter Brandt and Fidelity's Jurrien Timmer have floated the possibility of Bitcoin falling to $60,000-$65,000, Wall Street analyst Tom Lee and Bitwise's Ryan Rasmussen maintain a bullish long-term view. Lee points to gold's parabolic rise in 2025 as a precursor for crypto, and Rasmussen believes Bitcoin could break its traditional four-year cycle and reach new all-time highs in 2026, partly fueled by ongoing Quantitative Easing from the Federal Reserve.
