That's why some exchanges have created their own coins with the same value as real Bitcoins by placing stablecoin collateral with bitcoin equivalents! Since exchanges do not immediately add crypto trading on their platforms to the blockchain, this leverage is difficult or almost impossible to capture. Because, common users don't understand anything.
Exchanges can create as much fake bitcoin as they wish, even beyond the 21 million limit which is being dictated by full nodes and the consensus rules they dictate. It is called fractional reserve banking, but in the case of exchanges specifically, that will mean they operate on fractional reserves lying to traders about how much they can withdraw. Why do you think almost all popular exchanges out there have different promotions, welcome bonuses, staking pools, and similar stuff? The goal of all that is to incentivize traders to never withdraw, to never claim what they are being shown in their accounts because if suddenly everyone starts to withdraw, a fractional reserve exchange will collapse and go bankrupt because it has been insolvent all along. Their ability to issue fake "bitcoin receipts" cannot be taken away, even with strict regulations in place. It is all about incentives again since regulators themselves aren't interested in bitcoin being successful and thus not actively preventing the attempts of fractional reserve business, since, in their view, every crisis due to insolvency of exchange undermines the confidence in the bitcoin industry as a whole.