Why Japan's Currency Rally Is Reshaping My Bitcoin Outlook

By Juan Villaverde

Bitcoin and the rest of crypto started rallying sharply following the U.S. Treasury's attempts to force down interest rates. 

But one thing surprised me. Liquidity is no longer leading Bitcoin by its customary three months.

Let me be clear about the timeline. The rally actually started on Monday, Aug. 17, a couple of days before the Treasury formally announced its buyback operations. 

Whether that detail leaked ahead of time, I can't say for certain. But it's worth noting. 

And what began as a short-squeeze eventually morphed into one of Bitcoin's biggest rallies since Nov. 5, 2024. That rally, you may recall, was ignited by Donald Trump’s election victory.

However, Bitcoin hasn't actually gained much ground since the Trump rally petered out. It reached a closing price of $78,000 on Aug. 21, with an intraday high around $79,000. 

Today, Bitcoin still trades at roughly $79,000. In other words, it has gone essentially nowhere for weeks.

That said, I want to revisit the liquidity picture this week. Because even though the current divergence between Japanese M2 and Bitcoin is likely temporary, something important is shifting below the surface.

To be clear, Japanese M2 still shows Bitcoin declining into a low around Oct. 18. And I believe a realignment process has begun that will gradually bring Bitcoin back into close correlation with liquidity as mid-October approaches.

But here's the thing. Bitcoin rallied so hard — retesting its last 320-day-cycle high near $82,000 — that I now think the October low is likely to be far less severe than originally expected. 

Rather than a full retest of the $60,000 four-year-cycle low, Bitcoin may experience a shallower correction. Perhaps as low as $70,000, but not meaningfully below.

That Bitcoin is testing its last 320-day-cycle high (even without actually crossing above it) is an encouraging development on its own.

Now, onto this week’s big macro news. 

Japan’s currency is rallying sharply — more steeply than it has all year. In fact, this is the strongest yen rally since early 2025.

That’s a very big deal. 

I've repeatedly said Japanese liquidity leads Bitcoin over the long run. However, the sheer strength of this rally is shining a bright light on an emerging anomaly …

This upcoming October low looks fundamentally different from every other low we've had in 2026.

Japanese M2 Breaks Out

Japanese M2 money supply (JpM2) is finally breaking out of the bearish pattern it has been in since late 2025.

The orange downtrend line connects the early May and early August JpM2 tops, highlighting this breakout. 

We already have a confirmed four-year-cycle low on Bitcoin, set on June 25 and July 1 — essentially a double-bottom. 

The October low will likely land somewhere between $65,000 and $70,000. 

And it will be the last cycle downturn before the real new bull begins, heading into 2027.

Bitcoin Starting to Realign with JpM2

Near-term price action seems to show Bitcoin slowly realigning with JpM2.

I originally expected Bitcoin to retest its $60,000 four-year cycle low around mid-October. Because of this, for weeks, I consistently counseled caution. 

However, two things occurred to change that. 

First, the unusually robust price action we've now seen. 

Second, JpM2 is itself breaking out in rather dramatic fashion. 

Because of this, the prospects for crypto have also improved. 

Solid support now exists for a positive, constructive attitude toward Bitcoin — that didn’t used to be there. Even though the next four to six weeks still look a bit sluggish to me. 

But once we clear this October low, I see little reason left to remain cautious or bearish on this market for the remainder of 2026. 

Will we get a new big bull market heading into 2027?

Stay tuned to this space to find out!

Best,

Juan Villaverde

P.S. The way to meet this important moment in crypto is to buy on breakouts and sell when momentum starts to fade.

My subscribers receive timely signals from my Crypto Timing Model and my Forecasting Model, which spot liquidity before it starts to flow in earnest.

To see how this two-pronged system can benefit your long-term crypto investments, click here.