imagine there are 2 main holders of real bank account fiat
         T                           C
$2,000,0000            $2,000,000
1500000usdt             500000usdt
  500000usdc            1500000usdc

if all users in exchange T
moved their usdc value to usdt inside the T exchange
the bank money of T does not change

if all users in exchange C
moved their usdt value to usdc inside the C exchange
the bank money of C does not change

..
if users of C exchange withdrew their usdc and put it into exchange T
         T                           C
$2,000,0000            $2,000,000
1500000usdt             500000usdt
2000000usdc                      0usdc

T exchange. then sends (behind the scenes) its own usdc reserves back to C to get C to send $1.5m of bank account money to T

         T                           C
$3,500,0000            $500,000
1500000usdt             500000usdt
2000000usdc                      0usdc

though this demo is not exact. because most wallets only keep 10% as hot wallet, and most bank accounts as hot account to move and control daily withdrawal demands. so the internal behind the scenes swaps are only 10% amounts not full amounts in any one go