Re: What is your idea about fractional reserve practice at bitcoin exchanges?
I wouldn't touch these exchanges even with a ten foot pole. Too many manipulation can occur in these.
Of course not, but the question is what you can do to prevent them from creating too much volatility in market?
If one of the large Chinese exchanges are taking a market share of 15%, they can essentially sell millions of bitcoins on the whole market and push the price into single digits and crash people's confidence in bitcoin, and people can not do anything about it: The only thing you can do is to withdraw coins from the platform thus they will have a bitcoin bank run, but as most of the people on Chinese exchanges are speculators, I doubt they even want their bitcoin back if the price dropped to that low
Besides, many people still don't want to withdraw bitcoin since it is too easy for them to lose it without proper IT knowledge, they regard the exchanges like a stock exchange, they trade there but never touch a bitcoin/stockThe main problem is that currently there is no regulation for bitcoin exchanges anywhere, and maybe there will never be
On further thoughts, another exchange might use the same trick to create fictional fiat money to buy lots of coins on their platform, and let the arbitrager to drain the bitcoins from the other exchange to make a bitcoin bank run for them... We need more exchanges