Since the crypto markets have been in a tailspin, investors in the industry have been on the fringes, reportedly dreading a critical downturn in the economy if not managed on time.

Bitcoin, the most popular cryptocurrency, has lost 37% this month and 57% this year, falling below USD 20,000 since December 2021 while Ether, the second-ranked cryptocurrency, was trading at USD 1,075 after falling below its symbolic level of USD 1,000.

The price decline represents the challenges encountered by industry stakeholders as they envisage further collapse, which could result in them selling their holdings to meet margin requirements to cover shortfalls, causing a ripple effect in the market.

It is worth noting that smaller cryptocurrencies have suffered the most as investors pursued the security of higher-valued currencies such as bitcoins and other stable coins that are weighed against traditional assets such as the U.S. dollar.

According to reports, the total market capitalization of cryptocurrencies is USD 870 billion, down from an apex of USD 2.9 trillion in November 2021, indicating that investors are expediting their withdrawals from the industry ecosystem.

However, many are exploring other options such as selling assets or seeking a bailout from another company to withstand this sudden havoc. Given the amount of credit that is being removed from the system, lending institutions will be forced to shrink the size of their lending books to contain the liabilities, which would result in limiting the potential amount of future credit available in the cryptocurrency space.

Experts believe that if the market rises, things will be refinanced as people raise equity, but if it tumbles further, it will be a considerably larger catastrophe.

Surprisingly, crypto developments have paralleled a slump in U.S. stocks, which are undergoing their largest weekly plummet in two years amid fears of soaring interest rates and a greater probability of a recession.

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https://economictimes.indiatimes.com/tech/technology/crypto-industry-gripped-by-anxiety-as-bitcoin-wobbles-near-key-20000-level/articleshow/92327389.cms?from=mdr