Bitcoin BTC$92,783.58 traders may want to add the Japanese yen (JPY) to their list of related markets, moving beyond the dollar index, as the connection between the cryptocurrency and the yen has hit a record high over the last 90 days.

The 90-day correlation coefficient between BTC and Pepperstone's JPY index has risen to 0.86, the highest ever, according to data source TradingView.

That high correlation means the two assets have been moving in the same direction so tightly that 73% of BTC's price swings over the past 90 days mirror moves in the yen. The 73% figure – known as the coefficient of determination – comes from squaring the correlation coefficient and shows a model's "goodness of fit" as an intuitive percentage.

Pepperstone's JPY Index, known as JPYX, is a currency index contract for difference (CFD) that measures the Japanese Yen's strength against a basket of four major currencies, EUR, USD, AUD, and NZD.

The tight correlation between bitcoin and yen means the once-independent BTC is now under the shadow of Japanese currency swings, tanking or surging with the yen, as it has done over the past 90 days. In other words, for now, BTC seems to have lost its appeal as a portfolio diversifier, turning what was once a unique "digital gold" hedge into a doubled-down bet on yen.

That said, traders should note that correlations between cryptocurrencies and traditional assets like stocks and currencies are often transient.

BTC peaked in early October and took a beating in the following two months, as the JPY index extended its downtrend, with sell-offs in both stalling after mid-December.

Moreover, the yen has been in a downtrend since April last year, as concerns about the fiscal debt sustainability lifted Japanese government bond yields. With the debt-to-GDP ratio of 240%, Japan is one of the most indebted nations in the world, although much of that debt is held by domestic investors.

Japan's elevated debt traps its central bank between a rock and a hard place: raising interest rates spikes debt-servicing costs and worsens the fiscal mess, while holding rates low risks a full-blown yen slide.

Some observers argue the fiscal crisis is already unfolding in currency markets, with a sharply weaker yen, and that only a potential U.S. recession will offer Japan any breathing room.