What Role Does the Insurance Fund Play in Preventing a ‘Bank Run’ on the Exchange?

The insurance fund prevents a 'bank run' by ensuring the exchange's solvency and the guaranteed payment of profits to traders. A bank run is often triggered by a loss of confidence that the institution can meet its obligations.

By publicly maintaining a healthy insurance fund, the exchange demonstrates its ability to absorb major market shocks and cover negative balances, thus preserving trader confidence and preventing a mass withdrawal of funds.