What Is a “Bank Run” in the Context of Stablecoins?
A stablecoin bank run is a sudden, mass redemption or selling of the stablecoin, driven by a loss of confidence in its ability to maintain the peg. Users rush to exchange their stablecoins for the underlying collateral or a more stable asset.
In algorithmic stablecoins, this manifests as a rush to sell the stablecoin, which triggers the death spiral mechanism.
