China's money supply has surged to $52.2 trillion: what this means for Bitcoin and markets
The Chinese economy continues to increase liquidity at a record pace. The M2 aggregate, expressed in US dollars, has reached $52.2 trillion. This is 2.3 times higher than the comparable figure for the United States. However, behind these numbers lies a much more complex and less obvious dynamic than simply the growth of the money supply.
My data analysis shows that the primary influx of liquidity has not yet translated into increased demand for risky assets. A significant portion of these funds is settling in bank deposits, debt refinancing instruments, and remains within the financial system without reaching the real economy or stock markets. This explains why we are not observing a classic inflationary spiral or a powerful rally in traditional assets.
Bitcoin loses its connection with stocks
At the same time, an interesting shift in the correlation between Bitcoin and the technology sector is being recorded. While before 2025, BTC showed a strong link with the iShares Expanded Tech-Software ETF index, this dependence has now noticeably weakened. Essentially, we are witnessing a process of disintegration: the digital currency is moving on its own trajectory, while stock indices follow their own path.
These two observations—the stagnation of Chinese liquidity and the breakdown of BTC's correlation with stocks—may be links in the same chain. If China's massive money supply remains locked in the banking system and does not enter the markets, its growth does not create demand for either stocks or Bitcoin. This explains why BTC is increasingly reacting to global capital flows rather than local fluctuations in stock indices.
My expert opinion: The situation resembles a "liquidity trap," where money exists but is not working. For the cryptocurrency market, this means that classic macroeconomic indicators, such as M2 growth, are losing their predictive power. The true driver for BTC now is not so much the volume of printed money, but rather the velocity of its circulation and investors' willingness to move into risky assets. As long as Chinese liquidity remains frozen, it is premature to expect a powerful bullish impulse from this factor.