China's money supply has reached $52.2 trillion: what this means for Bitcoin and stock markets
Analytical platform Alphractal has recorded an all-time high: China's M2 money supply in dollar terms has reached $52.2 trillion. This is 2.3 times higher than the comparable figure for the United States. However, behind this colossal volume of liquidity lies an unexpected paradox — the money is not reaching the real economy or markets.
The Paradox of Chinese Liquidity
Despite the impressive growth in M2, the bulk of these funds remains trapped within the financial system. Contrary to expectations, the liquidity is not translating into consumer demand, inflation, or an active inflow of capital into risk assets. The money is accumulating in deposits and banks, and is being used for debt refinancing, rather than for buying stocks or cryptocurrencies.
A comparison of M2 dynamics with key Chinese indices — the Hang Seng, Shanghai Composite, and Shenzhen Component — confirms this thesis. The growth in the money supply has yet to be reflected in stock market quotes. This points to a structural problem: liquidity is locked in a "financial bubble" and is not fueling real demand.
Bitcoin Loses Correlation with Stocks
Simultaneously, there is a breakdown of the long-standing correlation between Bitcoin (BTC) and technology stocks, particularly the iShares Expanded Tech-Software ETF. Until 2025, this relationship was strong, but now BTC is moving on its own trajectory, independent of stock market dynamics.
None of the traditional sectors are showing a stable correlation with the leading cryptocurrency anymore. This means Bitcoin has ceased to be merely a "tech stock" and has begun reacting to global liquidity flows, rather than the behavior of index funds.
Market Implications
These two observations — China's trapped liquidity and the weakening link between BTC and stocks — may be interconnected. As long as China's money supply does not enter the markets, neither stock indices nor Bitcoin will receive a strong boost from this source. However, if Beijing decides to redirect these funds, we could witness a massive capital shift into cryptocurrencies and risk assets.
My expert opinion: The growth of China's M2 is a "powder keg" that has yet to find its spark. For the crypto market, the key signal will be the moment when this liquidity begins to flow into real investments. For now, BTC continues to consolidate, detached from traditional markets, making it more vulnerable to global macroeconomic shocks, but also a more independent asset.