Bank Run

Definition ∞ A bank run occurs when many clients withdraw their funds from a financial institution simultaneously. This rapid withdrawal is typically driven by concerns about the institution’s solvency. Such an event can destabilize a bank or a crypto platform, potentially leading to its collapse if it cannot meet withdrawal demands. The fundamental issue is a loss of confidence, causing a liquidity crisis as assets cannot be converted to cash quickly enough.
Context ∞ In the digital asset space, bank runs manifest as rapid and extensive withdrawals from centralized exchanges, lending platforms, or stablecoin protocols. These events highlight the importance of transparency and robust collateralization mechanisms in preventing systemic risk within the crypto ecosystem. Regulatory discussions often address safeguards against such occurrences in decentralized finance.