You do know that Coinbase has a $50k a day withdrawal limit? A lot of doomsday scenarios leave out this important detail when talking about a hypothetical bank run.
You know, the whole benefit of being in the USD. The made up rules of society that provide stability in times of crisis.
If you are transferring tokens in and/or converting tokens to cash, I don't believe those transactions would meet the criteria to be covered by FDIC at that point. I might be wrong on that assumption, but FDIC is only deposit insurance, not withdraw insurance, and its under very specific terms.
Coinbase could shut down converting crypto to cash at any time. There is no promise or guarantee that they have to allow cash exchanges or deposits, since they're basically buying and selling crypto on your behalf.
By the FDIC. Of course, FDIC only covers dollar-denominated balances (savings accounts, checking accounts, etc. etc.). Even money-market accounts (very cash-like) are NOT covered by FDIC, which is why money-markets get a wee bit of a bump in %yield.
Coinbase claims they have the BTC insured through some other means. I don't know how to look into those details or how trustworthy it'd be (ex: AIG "insured" a bunch of mortgages through Credit Default Swaps, which ended up being worthless).
But overall, the idea of losing a security through various means (ex: Credit Default Swap "insurance" turns out to be a sham and the mortgage debt is all worthless) is kind of "normal" in terms of financial markets.
Similarly, if all the BTC disappeared it'd be terrible for BTC-holders, but I think people generally understand that those risks exist.
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Look, I think Cryptocoins are stupid at this point (even proof of stake, but that's another thing). And Coinbase's service going in-and-out over the past day or so is clearly a threat (if BTC moves while Coinbase is down, you lose your opportunity to buy-and/or-sell at the prices you want).
But I don't think there's anything shady going on at Coinbase specifically.
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Now if you want to talk about shady business, we can talk Binance, Bitfinex, and Tethers. Plenty of shady things going around in the cryptoworld.
Given the price volatility of crypto, that sounds absolutely insane to me. Also, I don't think this prevents a run, on the contrary, when everyone hits the sell button and cannot actually exit then panic will ensue.
On the day you might think that limit matters, it's not really gonna matter.
Presumably, people can sell all their holdings and withdraw over time.