YT-music stores & streams music in AAC format, unfortunately according to the specification the FiiO M5 does not support this codec.

The reason is probably that AAC is a format with lossy compression, and the FiiO M5 (apart from the must-have format MP3) only supports lossless codecs because it wants to be a "High Resolution Music Player".

It's not a smartwatch and it doesn't have apps like YouTube or Spotify. According to a review, it can stream such things via your mobile phone, but then you can also listen to music directly via your mobile phone.

YT's site says it streams at "256kbps AAC bit rate", so the FiiO seems to be compatible. But why buy a "high resolution" portable when an "average" player will do?