What Is a Bank Run? What Happens When Everyone Withdraws

On March 9, 2023, customers pulled more than $40 billion out of Silicon Valley Bank in a single day. The bank told its supervisors it expected over $100 billion more to leave the next day (source: Federal Reserve review of SVB). California regulators closed it on the morning of March 10, before that second wave could go out the door.

For most of the last century, a bank run meant black-and-white photos of queues outside banks in the 1930s. The 2023 run happened on phones, in hours. It brought back an old question: what would happen if everyone took their money out of the bank at the same time?

The question reaches into crypto too. Stablecoins and crypto exchanges hold other people's money and promise to hand it back on demand. That is the same promise a bank makes, so they can be run on in the same way. Unlike most bank accounts, they come with no government deposit insurance.

A run follows the same steps wherever it happens: people fear the money will run out, and each rushes to be first in line, because those who come late may not be paid in full. In 2022 the same rush hit a stablecoin, TerraUSD, and a crypto exchange, FTX.

What is a bank run?

A bank run is when many customers pull their money out of a bank at once because they fear it will fail. Banks lend out or invest most deposits, so a big enough rush can drain the cash and force the bank to sell assets at a loss (source: Nobel Prize in Economic Sciences 2022).

Three terms turn up in almost every bank-run story, and each means something different:

Online banking lets a run build where it is hard to see from outside the bank. Savers queued outside Northern Rock branches in the UK in 2007, yet a committee of Parliament found that most withdrawals were made "through the Internet, by telephone or by post" (source: House of Commons Treasury Committee).

What happens if everyone withdraws their money at once?

If everyone asked for their money on the same day, the bank could not pay them all, because most of that money is no longer in the bank. A bank takes deposits you can withdraw at any moment and turns them into loans and bonds that pay back over years (source: Nobel Prize in Economic Sciences 2022).

A bank keeps enough cash for an ordinary day, when a few customers withdraw and others deposit. US banks no longer face a reserve requirement. The Federal Reserve cut it to zero on March 26, 2020; before that, the part of a bank's checking balances above a set amount, $127.5 million in 2020, carried a 10% requirement (source: Federal Reserve). So the size of a bank's cash cushion is a planning decision, and it is sized for normal days, well short of what customers could ask for at once.

The easiest way to see the problem is to run the numbers on a small bank. Say 100 customers, including you, each keep $1,000 there, so the bank holds $100,000 of deposits. It has lent out or invested $90,000 in home loans and government bonds, and it keeps $10,000 ready as cash. On a normal day a handful of people withdraw a few hundred dollars each, and $10,000 is plenty.

Now say a rumor spreads that the bank is in trouble, and you and 30 other customers ask for your money on the same morning. That is $31,000 of withdrawals against $10,000 of cash. The bank cannot call in a 25-year home loan by lunchtime, so it sells bonds. If it has to sell in a hurry, or bond prices have fallen since it bought them, it gets back less than it paid. Each loss makes the bank weaker and gives the other 69 customers a reason to join in.

The order matters. The first customers to withdraw are paid in full. Those who arrive after the cash is gone have to wait for deposit insurance, or for whatever the bank's assets fetch once it is closed. A Richmond Fed economist put it simply: late withdrawers suffer losses, which is why "everyone wants to be the first to get their money out" (source: Federal Reserve Bank of Richmond).

What causes a bank run?

A bank run starts when depositors lose confidence that the bank can pay them all, and that loss of confidence can come from a rumor as well as from real losses. A run can even bring down a bank that was sound before it started. Economists Douglas Diamond and Philip Dybvig set out the mechanism in a 1983 article: a rumor that more depositors are about to withdraw their money than the bank can cope with "can become a self-fulfilling prophecy" (source: Nobel Prize in Economic Sciences 2022). The work earned them a share of the 2022 Nobel Prize in economics, with Ben Bernanke (source: Nobel Prize press release). If you think everyone else will run, the safest move for you is to run too, even if you believe the bank is fine, because being late is what costs money.

The same research points to the cure. When depositors know the government stands behind their money, they have no reason to rush when rumors start. The prize committee says runs can be prevented by the government providing deposit insurance and acting as a lender of last resort to banks. A lender of last resort, usually the central bank, lends to banks that are sound but short of cash, so they can pay depositors without selling assets at a loss.

Most real runs still begin with a real problem. The committee's own background paper notes that banking panics have been shown to move closely with the business cycle, the ups and downs of the economy (source: Nobel Prize scientific background). Silicon Valley Bank, too, was sitting on large losses on its bonds before anyone ran (source: Federal Reserve review of SVB). What a rumor changes is the speed.

Deposit insurance: How much of your money is protected

In the US, deposit insurance from the FDIC covers $250,000 per depositor, per FDIC-insured bank, for each account ownership category (source: FDIC). The UK protects £120,000 per person at each bank (source: Bank of England FSCS explainer). EU law sets €100,000 per depositor at each bank (source: Directive 2014/49/EU).

Each scheme sets its own basis for the limit and its own payout time:

The UK raised its limit from £85,000 to £120,000 for banks that fail from December 1, 2025. Each holder of a joint account is covered up to £120,000 (source: Bank of England FSCS explainer). In the EU, the €100,000 level is set by a 2014 directive, and every deposit you hold at the same bank is added together to test it (source: Directive 2014/49/EU).

The FDIC says no depositor has lost a penny of insured money since it was set up in 1933 (source: FDIC). Its limit applies per ownership category, which is the legal form of an account. Single accounts, joint accounts and certain retirement accounts such as IRAs are separate categories, so one person can have more than $250,000 insured at the same bank. Two single accounts in your own name at one bank, though, share one $250,000 limit. The FDIC says it usually pays insured depositors the next business day, either through a new account at another bank or by check (source: FDIC deposit insurance FAQ).

Money above the limit is where runs start. Uninsured depositors are the ones with a reason to leave early, and at Silicon Valley Bank they were most of the bank. On March 12, 2023, the US Treasury, the Federal Reserve and the FDIC used an emergency exception to protect every depositor, insured or not. They said any cost to the insurance fund would be recovered through a special charge on banks, with no losses borne by taxpayers (source: joint statement, March 12, 2023). That was a decision made in a crisis, and nothing obliges a government to repeat it.

Deposit insurance has largely done its job. Writing before the 2023 runs, a St. Louis Fed economist called banking panics "pretty much a thing of the past, thanks to federal deposit insurance" (source: Federal Reserve Bank of St. Louis).

Famous bank runs in history

Well-known bank runs include the US banking panics of 1930 to 1933, Northern Rock in the UK in 2007, Washington Mutual and Wachovia in 2008, and Silicon Valley Bank in 2023. The 1930s runs were a decisive factor in making the Great Depression so deep and prolonged (source: Nobel Prize press release).

Some 7,000 banks failed from 1929 to 1933 (source: Federal Reserve Bank of St. Louis). On March 6, 1933, President Roosevelt suspended all banking transactions in a nationwide bank holiday, and some 4,000 banks never reopened (source: Federal Reserve History). That June, Congress created the FDIC in the Banking Act of 1933 (source: Federal Reserve History on the Glass-Steagall Act).

Four runs show how the speed has changed over nearly a century:

Parliament's Treasury Committee said the days from September 14 to 17, 2007 saw "the first run on the retail deposits of a United Kingdom bank since Victorian times" (source: Treasury Committee report). Bank of England Governor Mervyn King said in October 2007 that the only way to stop the run was the government's guarantee of Northern Rock's deposits (source: Bank of England).

Can bank runs still happen today?

Bank runs still happen, and the 2023 run at Silicon Valley Bank was far faster than the big runs of 2008. Counting the withdrawals of March 9 and those it expected on March 10, Silicon Valley Bank was set to lose roughly 85% of its deposits in two days. Washington Mutual's run in 2008 took 16 days (source: Federal Reserve review of SVB). The Fed's review pointed to social media, a closely networked group of depositors and technology: social media let depositors spread their worries instantly, and technology let them withdraw immediately.

Those depositors knew each other. Most of SVB's deposits came from businesses backed by venture capital. Many of those investors used social media to urge the companies they funded to move their money out (source: FDIC testimony, March 2023). When one small group holds most of a bank's deposits, one warning can move most of the money.

Bank runs in crypto: Stablecoin and exchange runs

Crypto has three versions of the bank run: a bank run that hits a stablecoin's reserves (USDC, 2023), a run on the stablecoin itself (TerraUSD, 2022) and a run on a crypto exchange (FTX, 2022). Each starts with holders fearing they will be late, and no deposit insurance scheme covers the coins or exchange balances people hold.

Bitcoin's price, taken daily at 5 p.m. Pacific time, fell in the two runs inside crypto; in the 2023 bank run it fell at first, then rallied sharply after the US government stepped in (source: FRED, Federal Reserve Bank of St. Louis).

USDC and Silicon Valley Bank: A bank run that hit a stablecoin

A stablecoin issuer keeps part of its reserves as cash in banks, so a bank run can reach a stablecoin's holders even if nothing is wrong with the coin. On the evening of March 10, 2023, Circle said it could not withdraw $3.3 billion of USDC reserves from Silicon Valley Bank, around 8% of the total. USDC holders rushed to redeem their coins, and once redemptions paused, the selling moved to exchanges (source: Federal Reserve FEDS Note). The coin traded as low as 86 cents, recovered after the Sunday rescue, and was back at a dollar once Circle resumed redemptions on Monday, March 13.

The same Fed note shows what happens when redemptions with the issuer pause: the coin keeps trading on exchanges, and the selling moves there (source: Federal Reserve FEDS Note). A bank can close its doors for a day, while a stablecoin keeps trading around the clock. The collapse of Silicon Valley Bank showed that a stablecoin backed dollar for dollar is still only as safe as the banks holding its cash.

Say you trade the BTCUSDT Perpetual on BloFin with 1,000 USDT of margin. If USDT lost its dollar peg for a weekend, the way USDC did in March 2023 (source: Federal Reserve FEDS Note), your 1,000 USDT of margin would be worth less in dollars. Because the contract is priced in USDT, bitcoin's price in USDT would rise even if its dollar price stood still, so a leveraged long would gain USDT while a leveraged short would lose it and move closer to liquidation. If you would rather your margin sat in USDC, BloFin lists the same market as the BTCUSDC Perpetual, and the live price and funding rate of the USDT version are on the BTCUSDT Perpetual page.

TerraUSD: A run on the stablecoin itself

TerraUSD, known as UST, was an algorithmic stablecoin. It held its dollar price through a promise: one UST could always be swapped for a dollar's worth of a second token, LUNA. There was no pile of cash or bonds behind it. About $18 billion of UST was in circulation at its peak. When redemptions ramped up on May 9, 2022, UST fell as low as 60 cents, then slid to 22 cents, and LUNA collapsed from $31 to a cent (source: Federal Reserve Bank of Richmond).

Investors lost more than $40 billion, according to US prosecutors, who say UST and LUNA together had an apparent market value of over $50 billion at their peak (source: US Attorney's Office, Southern District of New York). Terraform's co-founder, Do Kwon, pleaded guilty to fraud charges in August 2025. The Richmond Fed brief notes that UST shared only some features of a classic bank run. The rush to redeem before the price fell further, though, is the same instinct.

FTX: A run on a crypto exchange

An exchange run happens when customers fear the exchange cannot return what they hold. It can hurt more than a bank run, because deposit insurance covers bank deposits, and the FDIC lists crypto assets among the products it does not insure (source: FDIC list of products not insured). In November 2022, an announcement by rival exchange Binance "caused many FTX customers to withdraw their funds from FTX", according to the US Securities and Exchange Commission (source: SEC complaint against Sam Bankman-Fried). FTX's chief executive told staff it had seen roughly $6 billion of net withdrawals in 72 hours (source: Reuters via Yahoo Finance).

FTX paused withdrawals on November 8 and filed for bankruptcy on November 11, 2022 (source: SEC complaint against Sam Bankman-Fried). The run exposed more than a shortage of cash. Regulators allege FTX's customer money had been moved to its sister trading firm, Alameda Research, and that over $8 billion of customer deposits were missing (source: CFTC complaint). When an exchange holds your coins, you rely on it the way a depositor relies on a bank. That is why it pays to know how exchange custody works and what happens if a crypto exchange shuts down.

What protects stablecoin holders in a run?

In the US, stablecoin holders are protected by the GENIUS Act, signed July 18, 2025. From January 18, 2027, it requires licensed issuers to back every coin at least one for one with safe assets, publish a redemption policy and monthly reserve reports, and put holders first in line for the reserves if the issuer fails (source: Public Law 119-27).

The rules target the exact weak points a run exploits:

• The reserves must be cash, bank deposits, short-term Treasury bills and similar safe assets, and the issuer may not pledge or reuse them except in narrow cases, such as raising cash to meet redemptions.

• The redemption policy must set out clear steps for timely redemption, and the monthly report must show the size and makeup of the reserves.

• In a failure, holders' claims on the required reserves come ahead of every other creditor, and the court must use its best efforts to order payouts to begin within 14 days after a required hearing.

None of this is insurance. The Act says payment stablecoins are not covered by federal deposit insurance and makes it unlawful to claim they are. The GENIUS Act protects holders by making a run less likely and a failure more orderly, and if the reserves fall short, the holder bears whatever part of the loss a claim against the issuer's other assets does not recover.

The FDIC has also proposed a rule on one detail. In an April 2026 proposal, it said bank deposits held as a stablecoin's reserves would be insured to the issuer as corporate deposits, added to the issuer's other corporate deposits at the same bank and insured up to $250,000 in total there. The cover would not pass through to the people holding the coins (source: FDIC proposed rule, Federal Register). It is a proposal and has not been finalized. Even under the Act, regulators can limit redemptions in some circumstances, so a rush can still slow payouts, the core of stablecoin redemption risk.

What proof of reserves shows

Exchanges publish proof-of-reserves reports to show customers the money is there. The US audit regulator's investor office says they exist to calm fears about "a run on a crypto exchange or stablecoin issuer" (source: PCAOB investor advisory). The same advisory warns that these reports are not audits, usually say little about what the exchange owes, and only show the assets at one moment in time.

BloFin keeps a 1:1 reserve of all users' funds, and once you log in you can check that your own balance is included by comparing it with a Merkle tree, a cryptographic summary of every user balance (source: BloFin Help Center). In February 2024, BloFin added BTC and ETH reserve ratios to its proof-of-reserves page, alongside USDT (source: BloFin announcement).

When you read a proof-of-reserves report from any exchange, check the snapshot date and which coins it covers. Then check whether it counts what the exchange owes as well as what it holds.

Can there be a bank run on bitcoin?

Bitcoin itself cannot be run on like a bank: there is no issuer holding reserves and no promise to pay a fixed dollar amount, so its price can fall but there is no vault to empty. Bitcoin held on an exchange is different, because it is a claim on that exchange and is only as safe as the exchange.

Bitcoin was born in the aftermath of a banking crisis. Block 0, mined on January 3, 2009, carries a headline from that day's edition of The Times of London: "Chancellor on brink of second bailout for banks" (source: mempool.space block explorer). The headline referred to the UK government preparing to rescue its banks a second time, and the bitcoin genesis block still carries it for anyone to read.

Moving coins into a wallet you control removes the exchange from the picture and leaves you responsible for your own keys, the core trade-off between custodial wallets and self-custody. Where you keep your crypto decides which kind of run can reach it:

Should you take your money out of the bank?

For most savers, the answer turns on whether the money sits inside the insured limit, because insured deposits are paid back even when a bank fails. Taking cash out moves it somewhere with its own risks, from theft at home to price swings in crypto.

Four checks tell you more than any rumor:

1. Is your bank covered by a deposit insurance scheme? In the US, look for FDIC membership; in the UK, FSCS protection; in the EU, your country's deposit guarantee scheme.

2. Is your balance under the limit? $250,000 per ownership category in the US, £120,000 in the UK, €100,000 in the EU, each per bank.

3. Does one bank hold more than the limit? Money above it is uninsured, and spreading it across separately licensed banks keeps each part covered. In the UK, brands that share one banking license share one limit.

4. Where would the money go instead? Stablecoins and exchange balances carry no deposit insurance. Moving savings out of a bank to escape risk can mean taking on more of it. Check what crypto insurance coverage applies before you move anything.

Regulators named the warning signs at Silicon Valley Bank after it failed. About 94% of its group's deposits were uninsured, against 41% at comparable large banks (source: Federal Reserve review of SVB). The losses on its bond holdings reached 104% of the bank's total capital (source: FDIC testimony, March 2023). Its depositors were concentrated in one industry, and the run began the day after it announced a $1.8 billion loss on a $21 billion bond sale (source: Federal Reserve review of SVB). Most of these figures sit in a bank's regulatory filings, so few ordinary savers would spot them in time, which is the practical case for staying under the insured limit. This is general information about how protection works, not financial advice.

What a bank run means for you as a trader

For a trader, the closest thing to a bank account is the stablecoin your margin sits in. All three kinds of crypto run can reach it: a bank failure through the coin's reserves, a run on the coin, or a run on the exchange that holds it.

Of the 499 perpetual futures contracts BloFin listed on September 24, 2026, 475 settle in USDT, 10 in USDC and 14 in the coin being traded, so for most traders on BloFin the stablecoin that matters is USDT. Choosing between USDT- and USDC-margined contracts is partly a choice between two issuers' reserve designs, one of the main differences between USDT and USDC.

The link also runs the other way. Banks turn deposits into loans and bonds, so if savers moved enough money into stablecoins, the shift could drain bank deposits that banks lend from.

Looking to trade perpetuals margined in USDT or USDC? To get started, you'll need to first create a BloFin account, fund your account with cryptocurrency, and navigate to the BTCUSDT Perpetual page or BTCUSDC Perpetual page.

Frequently asked questions

Is causing a bank run illegal?

Several US states make it a crime to spread false rumors about a bank's finances. New York makes it a misdemeanor to willfully and knowingly spread an untrue statement or rumor that is derogatory to a bank's financial condition or affects its solvency or financial standing (source: New York Banking Law, Section 671). Florida's law is similar but requires the person to act willfully and maliciously, and makes it a first-degree misdemeanor (source: Florida Statutes, Section 836.06). Withdrawing your own money is legal. The laws target deliberately spreading falsehoods, and they vary from state to state and country to country.

When was the last bank run?

The best-known recent bank runs in the US came in March 2023, when Silicon Valley Bank lost more than $40 billion of deposits in a day and Signature Bank followed within the weekend (source: Federal Reserve review of SVB). Banks still fail: the FDIC has closed 11 more since First Republic Bank on May 1, 2023, the latest Tioga-Franklin Savings Bank in Philadelphia on August 21, 2026 (source: FDIC failed bank list). A bank can also fail slowly from bad loans, and the list does not record which closures began with a run.

Can a bank run spread to other banks?

A run on one bank can set off runs on others that look similar. After Silicon Valley Bank's problems became public, Signature Bank in New York saw deposit outflows that began on March 9, 2023 and became severe on March 10. New York regulators closed it on Sunday, March 12 (source: FDIC testimony, March 2023). The same Sunday statement that protected every depositor at Silicon Valley Bank announced a similar emergency exception for Signature Bank, and all of its depositors were made whole too (source: joint statement, March 12, 2023).

What happens to money above the deposit insurance limit?

Money above the insured limit becomes a claim on the failed bank, and the FDIC, acting as the bank's receiver, pays it out of what the bank's assets sell for. Depositors with uninsured funds usually receive periodic payments of a share of each dollar owed as the assets are sold, and the FDIC says selling off a failed bank's assets can take several years (source: FDIC deposit insurance FAQ).

Are stablecoins protected like bank deposits if the issuer fails?

Stablecoins carry no deposit insurance, so if an issuer fails you are a creditor waiting on a court, not an insured depositor waiting for a payout. From January 18, 2027, the GENIUS Act keeps a licensed US issuer's required reserves out of its bankruptcy estate and has holders share them in proportion to their holdings (source: Public Law 119-27). If the reserves fall short, the rest of each holder's claim ranks first against the issuer's other assets, to the extent the Act required more reserves. Stablecoins issued outside that regime depend on the rules of the country where they are issued.

Researched and written by the BloFin Academy editorial team with AI-assisted drafting. All facts independently verified. Primary sources include the Federal Reserve, the FDIC, the Bank of England, the European Union, the House of Commons Treasury Committee, the Nobel Prize committee, the US Securities and Exchange Commission, the Commodity Futures Trading Commission, the US Department of Justice and the PCAOB, current as of September 2026.

Nothing in this article constitutes financial, investment, legal or tax advice, including anything said here about moving money out of a bank. Deposit insurance limits and rules differ by country and by type of account, so check the scheme that covers your own bank. Stablecoins and exchange balances carry no deposit insurance, and a stablecoin can lose its peg. Leveraged products including perpetual futures carry additional risk, because losses can exceed your initial margin and positions can be closed out automatically. BloFin services are not available in restricted locations, including the United States. Do your own research and consider your risk tolerance before you trade on BloFin.