Credit Strain

Definition ∞ Credit strain refers to a condition where individuals, institutions, or entire markets face difficulty obtaining new credit or servicing existing debt obligations. This financial pressure can result from rising interest rates, reduced lender confidence, economic downturns, or liquidity shortages. It indicates a weakening in the ability of borrowers to meet their financial commitments. Such a situation can lead to defaults and broader financial instability across various sectors.
Context ∞ In the digital asset space, credit strain can manifest in decentralized finance lending protocols, where collateral values might drop, leading to liquidations. News reports often discuss the impact of macroeconomic conditions on crypto lending markets or the stability of algorithmic stablecoins during periods of market stress. Traditional financial market credit conditions also significantly influence investor sentiment and capital availability for digital asset ventures.