China's money supply has surged to $52.2 trillion: what this means for Bitcoin and stock markets
China's M2 money supply in dollar terms has reached a record $52.2 trillion, 2.3 times that of the United States. However, this massive influx of liquidity has not yet translated into growth in stock markets or cryptocurrencies.
The current dynamics of Chinese liquidity represent a unique macroeconomic phenomenon. Despite the explosive growth in the money supply, a significant portion of it remains trapped within the banking system—in deposits, debt refinancing, and other financial instruments. This means the money does not reach the real economy, does not stimulate inflation, and does not create sustained demand for risk assets.
An analysis of the correlation between China's M2 and key market indices—Hang Seng, Shanghai Composite, and Shenzhen Component—confirms this thesis. The main flow of liquidity remains locked within the financial system, failing to reach stock markets and generate real demand.
Bitcoin loses connection with the tech sector
A breakdown in the correlation between Bitcoin and the iShares Expanded Tech-Software ETF is being observed. This relationship remained strong until 2025 but is now weakening. Essentially, no sector of the traditional market maintains a strong correlation with BTC anymore. The digital currency moves in one direction, while stocks move in another.
These two observations may be linked. If Chinese liquidity remains trapped within the banking system and does not enter the markets, its growth is not yet translating into demand for either stocks or Bitcoin. This explains why Bitcoin has decoupled from the dynamics of the tech sector and is increasingly responding to global liquidity flows rather than the behavior of stock indices.
My analysis: The situation resembles a "liquidity trap," where money exists but does not work. For the crypto market, this means that local Chinese capital remains on the sidelines for now. However, if Beijing decides to redirect these flows into the real economy or allows freer capital movement, we could see a sharp influx of funds into Bitcoin and altcoins. For now, BTC continues to trade in its own paradigm, detached from traditional correlations.