A crypto bank run occurs when many investors start withdrawing their cryptocurrency deposits from exchanges and other platforms. It could result from panic in anticipation of a possible crash or shutdown of the service shortly.
A bank run could result in the crypto platform or exchange experiencing a liquidity crunch due to the higher-than-expected frequency of withdrawals. Usually, a crypto bank run precedes a crisis in the crypto market and could dent the overall sentiment, snowballing into a bearish mood across the market.
Concerns about the crypto exchange or platform's solvency could urgently force many institutional investors and customers to withdraw their funds. A bank run in itself could also increase the likelihood of default by the institution or platform, causing the platform to have insufficient funds to process all withdrawals and creating further panic among its consumers.