The leading crypto derivatives trading platform, Bybit, has outlined potential challenges awaiting the Japanese yen carry trade in 2025 as the Bank of Japan (BoJ) implements policy changes and faces evolving economic conditions.

According to the report, the yen’s status as a primary funding currency in the foreign exchange (FX) market could be questioned in the coming months. The evolving Japanese financial landscape could see an increased risk of rapid unwinding in yen carry trades, raising the need for alternative funding currencies and a diversification of currency exposure for traders.

Effectiveness of the Yen Carry Trade

Over the last three decades, the BoJ has maintained ultra-loose monetary policies, sustaining a zero or negative interest rate environment to fight inflation and stimulate economic growth. As a result, the yen carry trade has been a fundamental strategy for traders in global FX markets.

Carry trade is a strategy where FX traders take advantage of differences in interest rates between currencies. This popular investment strategy entails borrowing money in currencies with low interest rates and investing in stocks and bonds based on other currencies with higher interest rates.

Due to the yen’s low interest rates, it has remained an attractive funding currency over the years. Bybit noted that the effectiveness of the yen carry trade has been closely linked to global economic conditions like the U.S. Federal Reserve’s aggressive rate hikes. However, this carry trade has also been vulnerable to periods of financial stress and is becoming increasingly reliant on stable currency conditions.

This year, macroeconomic factors reshaping Japan’s economy are driving a significant transformation in the landscape for the yen trade. These factors include rising inflation, wage growth, and speculation about changes in the BoJ’s monetary policies.

Adaptability and Diversification

Before now, Japan has struggled with deflation and stagnant wage growth; however, recent years have seen inflation consistently surpass the BoJ’s long-standing 2% target. Since the BoJ has historically maintained ultra-loose policies, growing inflationary pressures may cause the central bank to hike interest rates. The implications of such decisions could cause a ripple effect in global FX dynamics, altering the yen’s appeal for carry trades.

While the yen may continue to serve as the preferred currency for carry trades, the BoJ’s actions could gradually reduce its dominance.

Bybit said FX traders could explore other high-yielding currencies like the Mexican peso (MXN), South African rand (ZAR), and Turkish lira (TRY) as alternatives to the yen; however, each currency comes with risks.

“Ultimately, the key to navigating the evolving carry trade landscape in 2025 lies in adaptability,” Bybit noted, adding that traders need dynamic risk management strategies and diversification to remain afloat.

Bitcoin and gold have been on highly disparate price trajectories for the past half-year, which spells trouble for the world’s largest cryptocurrency.

The yellow metal has continuously registered fresh peaks and is close to breaking above $3,000/oz for the first time ever – meanwhile, BTC has been stuck below $100,000 for most of February.

Gold Runs Wild

Experts have outlined numerous reasons behind the precious metal’s ascent in 2025. Perhaps the most probable one is the rising inflation in the US and other countries, coupled with the global uncertainty prompted by President Trump’s controversial actions since he assumed office for the second time in mid-January.

Being the go-to global asset in times of growing inflation and economic uncertainty, investors and central banks turned to gold in an unprecedented manner, perhaps last seen during the early days of the COVID-19 crash in 2020.

Financial gurus are now rushing to praise the yellow metal after years of disregarding it, claiming that the $3,000 price tag will fall inevitably and will be just the start of an even more impressive rally. Whether that would come to fruition is anyone’s guess at the moment, but it’s true that the metal has expanded its dominance over other assets in the past few months.

Gold stands unchallenged at the first position with a total market capitalization of almost $20 trillion. This number is higher than the next seven financial assets combined (which include BTC).

BTC Struggles

Gold’s price chart shows a contrasting picture compared to BTC’s (below). The precious metal actually tumbled after Trump’s win at the 2024 presidential elections in early November, while most riskier assets, such as bitcoin, exploded. It took three months for gold to recover the lost ground, which happened in early February.

In contrast, the primary cryptocurrency skyrocketed immediately after the elections and, after some ups and downs in late 2024 and early 2025, peaked on Trump’s inauguration day at almost $110,000. Since then, it has corrected hard and currently stands almost 15% away from its all-time high.

In contrast, the yellow metal has only solidified its strong run in February. It marked a new all-time high on Thursday, and even though it retraced slightly, it’s about 1-2% away from it.

So, do these completely different price movements spell even more trouble for BTC? After all, experts are convinced that gold will keep climbing and charting fresh peaks. Does that mean that bitcoin will continue to struggle?

Well, there’s no simple answer to this question. The fact is that demand for BTC has faded in recent weeks, especially in the US, which is evident by the declining Coinbase Premium metric and the lackluster performance of the local ETFs.

However, the financial markets, and crypto in particular, are highly irrational and unlogical places to be. It’s difficult to make even educated predictions, but bitcoin often does the opposite of what people expect of it. As such, don’t be too surprised if it reverses its trajectory in the following weeks and months and heads for new peaks regardless of gold’s performance.

VanEck has predicted that the United States could reduce its national debt by $21 trillion in the next 24 years.

The firm’s analysts believe that this could be achieved by creating a one million Bitcoin reserve over the next five years.

VanEck’s Estimate

According to the asset management company, a U.S. BTC reserve could slash the national debt if the crypto’s price increases to $21 million by 2049. This would represent around 18% of the total U.S. debt at that time.

“If the U.S. government follows the BITCOIN Act’s proposed path – accumulating 1 million BTC by 2029 – our analysis suggests this reserve could offset around $21 trillion of national debt by 2049,” said the institution’s head of digital asset research, Matthew Sigel, in its latest report.

VanEck’s estimate assumes that the cryptocurrency’s price will increase at a compounded annual growth rate (CAGR) of 25%, rising from $100,000 to $21 million per BTC in the next 24 years, while the country’s national debt climbs at 5% CAGR from $36 trillion at the start of 2025 to $116 trillion over the same period.

The prediction aligns with the BITCOIN Act proposed by Senator Cynthia Lummis. Reacting to VanEck’s proposal, the lawmaker posted on X, “Good idea.”

The Republican has been a vocal supporter of the idea of a U.S. BTC reserve. She has previously advocated for the initiative as a strategy to address the $36 trillion national debt and bolster the U.S. dollar’s global standing. She argues that the asset’s rising value could help reduce the debt over the next 20 years.

Lummis believes establishing this concept would correct past financial missteps and ease economic pressure on younger generations. However, the legislation that would facilitate the creation of the stockpile is yet to be reviewed by the Senate or House.

Growing Popularity Among Nations

Following in the footsteps of President Donald Trump, the concept of a BTC stockpile is gaining international attention, and several governments are actively considering its potential use.

In Venezuela, opposition leader María Corina Machado supports incorporating the cryptocurrency into the country’s supply, arguing that it could help recover stolen wealth and provide aid to its most vulnerable citizens.

Switzerland is also exploring this possibility, with its National Bank evaluating the coin’s utility as a backup asset alongside gold. Similarly, Hong Kong’s legislator Wu Jiezhuang proposed integrating Bitcoin into the country’s financial reserves in December to enhance economic resilience.

However, not everyone supports the idea. Former BitMEX CEO Arthur Hayes recently dismissed it as an impractical strategy that would serve political interests rather than ensure financial stability.