Bitcoin (BTC): China Turns Off the Credit Tap, the Market Remains Unfazed (For Now)

The Chinese thermometer turns red. The credit impulse, an advanced indicator that macro managers have been scrutinizing since the 2008 crisis to gauge market risk appetite, has turned downward. In previous cycles, the same signal preceded major reversals in risky assets by six to nine months. This time, Bitcoin shrugs it off. Is this a reprieve or a lasting disconnection? The answer lies less in historical correlation than in the identity of the marginal buyer of BTC, who bears little resemblance to those from 2017 or 2021.

Key Points

• The Chinese credit impulse, derived from the total social financing published by the People's Bank of China, measures the acceleration of credit rather than its level.
• This indicator preceded major movements in risky assets by two to three quarters in 2009, 2016, 2018, and 2021.
• Bitcoin has responded less since China banned crypto trading and its miners in 2021.
• The marginal buyer of BTC is now American and institutional: spot ETFs, corporate treasuries, and dollar liquidity.

The Credit Impulse, an Indicator Not Published by Beijing

No Chinese administration publishes a credit impulse. The indicator is reconstructed by economists from total social financing (TSF), the aggregate that the People's Bank of China releases online each month.

The TSF adds up everything that fuels the real economy with fresh money: bank loans, corporate bonds, local government issuances, and financing from the shadow banking sector. The outstanding amount now exceeds 400 trillion yuan, or nearly 60 trillion dollars.

The impulse measures something else: the year-on-year change in the flow of new credit relative to GDP. This nuance is crucial. A negative impulse does not mean that China stops lending, but that it is lending less quickly than a year earlier. It is a derivative, not a level. And markets, which thrive on variations rather than stocks, react precisely to this acceleration or deceleration.

Fifteen Years of Too Regular Coincidences

The track record of the indicator is humbling. The 4 trillion yuan stimulus plan launched at the end of 2008 propelled the impulse to new heights, and commodities like emerging market stocks followed suit.

The same happened in 2012, then in 2015 and 2016, when Beijing reopened the floodgates to cushion the yuan's devaluation and the collapse of its stock markets. Bitcoin, then under 500 dollars, began its ride towards 20,000 dollars.

The film also played in reverse. The deleveraging campaign of 2018, aimed at shadow finance, compressed the impulse just as the crypto market was shedding more than 80% of its capitalization.

The same sequence occurred in 2021: Chinese credit slowed in the spring, and the crypto winter set in the following year. The lag between the signal and the impact generally revolves around two to three quarters. This leads some specialists to claim that Bitcoin is the best barometer of global liquidity!

The Transmission Channel is Not Mystical

Chinese credit irrigates commodities, inflates exporters' surpluses, weighs on the dollar, and frees up margin for assets located at the end of the risk curve. Bitcoin occupies this end.

The Marginal Buyer of BTC Has Changed Passport

However, the mechanics of 2017 have jammed somewhere between Beijing and Chicago. China banned crypto trading in 2021 and expelled its miners the same year, erasing the direct channel that connected Chinese savings to order books.

The marginal flow now comes from elsewhere: American spot Bitcoin ETFs with their hundreds of billions of dollars in assets, corporate treasuries led by Strategy with over 840,000 BTC, and allocations from pension funds and wealth managers.

These buyers do not react to the Chinese credit tap. They respond to mandates, investment committees, and dollar liquidity: the Fed's balance sheet size, the level of the U.S. Treasury's current account, and now stablecoins, whose issuers recycle hundreds of billions into Treasury bonds.

However, the correlation of BTC with the global money supply remains solid. Its sensitivity to the Chinese component is much less so.

Disconnection Does Not Mean Immunity

The People's Bank of China publishes total social financing figures around the 10th of each month. Three consecutive quarters of decline, without a budgetary response from Beijing or U.S. monetary easing, have never left risky assets unscathed. Conversely, a decrease in the reserve requirement ratio or a new round of special sovereign bonds would reverse the curve in a matter of weeks. For now, the red light is flashing on only one dashboard, and it is not the one consulted by ETF managers.