Hi Guys,

Let's do a theoretical here:
Let's assume that some exchanges are not honest and they not only inflate their volume, but they actually sell what they don't have. So they have 1000 real BTC in their possession, but they sell (and hence promise to pay out) multiple times of that. Hence creating fake/paper/on the books Bitcoin out of thin air. I recall this is the reason of the yearly "not your key not your coins day", but still: probably most of the users don't participate.


My thinking:
If you sell BTC and receive FIAT it is VERY likely that you will withdraw it. Because you "know" FIAT it's better/safer at the bank and you already have an account. Not to mention that the Exchange's bank reserves are easier to check by the authorities (assuming a regulated exchange which most of them are nowadays). So it is much easier for them to get into trouble if they create fake FIAT balance.
BUT
If you do the opposite: sell FIAT and buy BTC I believe that it is more likely that the you will leave it on the exchange (or the exchange's custodial "wallet") for long long time.

My point is:
It is way (probably multiple times?) easier for the exchanges to create fake BTC liquidity. Because of this their price pressure/manipulation capability is magnitudes higher on pushing BTC price down than on push it up.

Thanks for reading this far, what do you think?


PS:
"You" stands here as a placeholder for the average user, not "us".