Crypto glossary
Bank run (crypto run)
A bank run is a rush of withdrawals by customers who fear losses; in crypto it hits exchanges, lenders and stablecoins whose assets cannot be sold fast enough.
Any institution that holds customer money but keeps part of it in assets that are slow or costly to sell is exposed to a run. Once doubts spread, each customer has an incentive to withdraw first, because those who leave early are paid in full and those who wait may get nothing. The withdrawals themselves force fire sales that make the fear come true.
Crypto has seen runs move far faster than in traditional banking, because withdrawals are online, round the clock and visible on-chain. Celsius froze withdrawals in June 2022, FTX collapsed within days in November 2022 after customers pulled billions, and TerraUSD unravelled in a few days as holders exited. In March 2023, the run on Silicon Valley Bank briefly pushed USDC below its peg.
Without deposit insurance or a lender of last resort, crypto platforms depend on holding liquid, fully segregated reserves. Proof of reserves, frequent attestations and redemption limits can reduce panic, but they cannot fix a balance sheet that does not hold the assets it claims.
Example
After rumours that an exchange used client deposits for its own trading, users try to withdraw billions in two days; the exchange pauses withdrawals and later files for bankruptcy.