re: Is Bitcoin vulnerable to a "bank run"? VIEW POST

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re: I see some issues in some of the comments, so hopefully I can make this clear: A Bank Run happens when a bank becomes insolvent, e.g. it does not...
 

I think Jesse's comment is perfect. Allow me to elaborate further though:

A Bank Run happens when a bank becomes insolvent, e.g. it does not have physical assets to match the value it's customers have given it. Bitcoin however is a fixed, scarce, resource - and bitcoin itself cannot be "run" in the same way a bank can.

Most people think banks keep all your money somewhere to be readily available (ie in cash). It's simply not true. The bank can and will use your money to invest in enterprises. While invested that amount cannot be retrieved at will (it's called illiquid). Maybe the bank bought a warehouse. Or financed a startup. Whatever. But your money is no longer "cash".

Depending on regulations, banks are required to keep a minimum of liquid cash available (say, 10%), so as long as people do not withdraw cash over 10% of total assets everything is fine. But if people start withdrawing money massively (for example because of a crisis) the bank can simply run "out of cash".

With Bitcoin this cannot happen as the "currency" is always available in the ledger by definition.

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