What is Bank Run?
Let's find out Bank Run meaning, definition in crypto, what is Bank Run, and all other detailed facts.
When it comes to investing, it's natural to get emotional and make quick decisions that sometimes might be irrational, especially when bad news start to spread (no matter if you invest in stocks, cryptocurrency, or anything else). That fear is exactly what causes bank runs, during which depositors hastily withdraw significant sums of money because they think that the institution in question will not have enough funds.
Though, since the daily amount that most institutions are permitted to retain in their vaults is typically capped, it frequently occurs that the bank simply does not have the funds on hand, rather than not having enough money to complete its responsibilities overall. The bank's reserves, however, might not be enough to support the number of withdrawals that happen during a bank run, which might ultimately push the institution to bankruptcy.
The collapse of Silicon Valley Bank (SVB), which occurred in March 2023 and was the second-largest bank failure since the 2008 financial crisis, is a great illustration of that. Many SVB customers began withdrawing their money as economic concerns affected the technology sector and venture capital started to dry up. The number of withdrawals reached roughly $42 billion, but SVB lacked such an amount of funds on hand, so they were unable to liquidate these deposits. This eventually led the bank to file for voluntary Chapter 11 bankruptcy.