Being insolvent means that they can't cover your obligations right now. If you deposit 100BTC in my wallet, I invest it for a year and you want it back right now I'm insolvent because I can't pay you right now; despite my books being perfectly balanced.
In the event of everyone wanting to withdraw their money at once, operating a fractional reserve and being insolvent are basically the same (unless you can instantly get the money out of your investments). That's a major reason why fractional reserve banking is frowned upon in the bitcoin ecosystem.
In the event of everyone wanting to withdraw their money at once, operating a fractional reserve and being insolvent are basically the same (unless you can instantly get the money out of your investments). That's a major reason why fractional reserve banking is frowned upon in the bitcoin ecosystem.