Key Takeaways
How Could China’s Rising M2 Money Supply Affect Bitcoin?
Historically, increased Chinese liquidity has correlated with BTC price increases, potentially boosting global demand.
What is Bitcoin’s short-term price target based on current market data?
Market projections suggest a short-term target of $117,000, driven by liquidation clusters around that level.
Bitcoin [BTC] could soon experience a major influx of liquidity after one of the deepest shakeouts in recent months.
This time, all eyes are on Chinese investors as global liquidity trends could favor the asset, allowing it to regain lost bullish momentum.
Chinese liquidity to save Bitcoin?
A recent report from Alpharactal highlights a notable increase in China’s M2 money supply.
The M2 money supply measures the total amount of money circulating in an economy that can be quickly converted into cash or used for spending. It is an important indicator of economic growth. According to the report, China’s M2 stood at $24.9 trillion at the time of writing, surpassing that of the US.
Historically, there has been a strong correlation between rising Chinese M2 and BTC market performance. An increase in M2 liquidity was often followed by a corresponding increase in the price of Bitcoin.
Source: Alpharactal
This happens because excess liquidity tends to flow into other asset classes, with Bitcoin being one of the main beneficiaries under historical circumstances.
Analyst João Wedson supports this outlook, noting that Bitcoin mining activity remains heavily concentrated in China. He said,
“There are still many Chinese miners and OG whales active in the market. As long as China’s M2 continues to rise, global liquidity will likely remain in Bitcoin’s favor.”
An opposing view
Ray Youssef, CEO of NoOnes, presents a contrasting view on Chinese liquidity and its impact on BTC. In an email he explained:
“Most of the new liquidity is likely to be absorbed domestically within the country’s economic system. China’s M2 expansion shows what is really happening under the hood of the global economy.”
Youssef believes that China’s liquidity boost is an attempt to stabilize its internal economy, possibly by increasing the money supply, rather than encouraging external investments such as BTC.
Facts from Sosovalue supports this argument, showing that Chinese demand for Bitcoin remains relatively low.
Hong Kong’s Bitcoin Exchange-Traded Funds (ETFs) continue to underperform, with a total value of just $461 million, a sharp contrast to the $61.91 billion held by US Bitcoin ETFs.
Source: Sosowaarde
In fact, Bitcoin alone is owned by the US government worth $34 billiondespite the US money supply being about 2.1 times smaller than China’s.
Still, Ray Youssef acknowledges Bitcoin’s link to global liquidity:
“Monetary easing cycles, wherever they occur, strengthen the long-term case for non-sovereign assets. Bitcoin continues to evolve as a central part of that conversation,” he added.
Bitcoin cycle and short-term target
The potential for a sustained rally now hinges on whether Bitcoin can sustain the repetition of a fractal cycle, a four-year pattern that has historically followed the asset’s movements.
If Bitcoin follows this pattern, it could defy expectations associated with Chinese liquidity and rise further. However, if the pattern is broken, a new high above the current $108,000 level could emerge.
Short-term projections still point to a target of $117,000, as suggested by the liquidation heatmap, which shows a cluster of short-seller positions around that price range.
Source: CoinGlass