Compass Investments

Bitcoin: The global M2 money supply has surged by one trillion dollars, yet BTC could still crashwhats the reason?

The cryptocurrency market has not yet recovered from the volatility that has rocked it over the past few weeks. Such signals do not rule out the possibility of a new downturn in the foreseeable future.

To a large extent, this weakness was caused by capital flows, especially given that the supply of stablecoins could not keep up with demand.

The global M2 money supply, another key market indicator, has shown a steady rise but has not reached the levels that many had already factored into their forecasts.

Could the increase in global M2 provide support for digital currencies?

According to the latest data from Alphractal, the global M2 supply surged by nearly $1 trillion over the course of the week.

China accounted for about 80% of this increasethat is, $800 billion. The remainder came from other countries. LINE_BREAB The global M2 aggregate includes cash and liquid deposits worldwide. It serves as the main reservoir of liquidity for higher-risk assets. An increase in M2 can channel capital into stocks, cryptocurrencies, and real estate. Conversely, a contraction in M2 typically puts downward pressure on these same asset classes. LINE_BREAB Comparing M2 trends with the Bitcoin [BTC] chart clarifies the picture.

In the past, a decline in the annual growth rate of global M2 coincided with Bitcoin hitting price lows. Such periods also paved the way for major rallies. At the same time, the annual growth rate of M2 remained positive, and a definitive shift into negative territory never occurred.

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This gave reason to believe that Bitcoin and altcoins could fall even further in price before the trend reverses.

Will Chinese liquidity affect Bitcoin?

China has become one of the main drivers of the recent rise in global M2. However, its role in the Bitcoin marketthe largest risky asset in the crypto spacehas remained limited.

Hong Kong spot Bitcoin ETFs have attracted only 48.1 BTC since the beginning of August. Their value amounted to approximately $3.057 million.

Capital inflows into Hong Kong Bitcoin ETFs.

Historically, capital from Hong Kong has flowed into Bitcoin through official channels, including ETF operators, in modest volumes. This indicated that the surge in Chinese liquidity driven by M2 growth had a negligible impact on Bitcoin.

In mainland China, cryptocurrencies continued to face hostility, and this asset class remains largely banned there. This further limited potential inflows from that region.

Why are inflows from the U.S. the most important?

Inflows from the U.S. remained a decisive factor in Bitcoins performance. The countrys money supply continued to grow relative to M2 figures from other countries. According to TradingView, the latest U.S. money supply stood at $23.16 trillion.

The growth in global M2 may have contributed to U.S. cryptocurrency ETFs recording their strongest week of capital inflows since April 17, 2026.

Weekly inflows into cryptocurrency ETFs totaled approximately $1.10 billion.

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