China's money supply has soared to $52.2 trillion: what this means for Bitcoin
China continues to expand its money supply at a record pace. According to my calculations, the M2 indicator in dollar terms has reached $52.2 trillion, which is 2.3 times higher than the comparable figure for the United States. This is a colossal gap that cannot help but attract the attention of global market participants.
However, such an impressive increase in liquidity does not automatically mean a flow of funds into risky assets. An analysis of flows shows that a significant portion of this money remains within the banking system—in deposits, debt refinancing, and other conservative instruments. It is not transforming into consumer demand, inflation, or rallies in stock or cryptocurrency markets.
Liquidity Trapped Inside the System
I have studied the dynamics of China's M2 in comparison with key indices—the Hang Seng, Shanghai Composite, and Shenzhen Component. The conclusion is clear: the main flow of liquidity has not yet reached real demand. Money circulates within the financial system but does not exit into external markets. This explains why Chinese stock indices are not showing rapid growth despite the record money supply.
Bitcoin Loses Correlation with Stocks
At the same time, I am observing a breakdown in the correlation between bitcoin and the U.S. technology sector. Previously, the link between BTC and the iShares Expanded Tech-Software ETF was strong, but starting in 2025, it has noticeably weakened. Currently, no sector of the traditional market has a strong correlation with cryptocurrency. Bitcoin moves in one direction, stocks in another.
These two observations may be connected. If Chinese liquidity truly 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 aligns with the fact that the leading cryptocurrency is increasingly reacting to global liquidity flows rather than the behavior of stock indices.
My expertise: The growth of China's M2 is a powerful bullish signal for markets, but only if this liquidity begins to flow into real assets. Currently, we are seeing a classic "liquidity trap" scenario. Until Chinese authorities change monetary policy or lift restrictions on capital outflows, this potential will remain unrealized. Investors should monitor inflation expectations in China and the actions of the People's Bank of China—these will be the trigger for the next phase.