Credit Crunch
A credit crunch, also known as a credit squeeze or financial crisis, is an economic phenomenon that occurs when the availability of finance to borrowers and investors (both individuals and businesses) suddenly decreases. It can be caused by any number of factors including rising interest rates, changing investor sentiment in the market due to heightened risk aversion or fear of potential defaults on loans. Credit crunches are often associated with recessions since they involve a sudden tightening of lending standards which could restrict business activity levels causing deflationary pressures.
The effects of a credit crunch on cryptocurrency markets may vary depending upon the type being dealt with – some cryptocurrencies like Bitcoin have seen their prices increase during periods where traditional currencies suffer from decreased liquidity as capital flows into alternative stores-of-value perceived as safe havens; however other cryptocurrencies may not experience similar gains if they lack sufficient demand for use cases such as payments or remittance services beyond speculation activities within global markets. Additionally, restrictive monetary policies implemented by governments around the world may affect different cryptos differently based upon regional restrictions imposed against certain digital assets while favoring others more broadly accepted across borders.
