A few hours ago, I posted a complex post about what I believed to be widespread fraud within the crypto industry on the r/Bitcoin subreddit, and ended up getting banned for asking about it.
I mentioned how it appeared that lots of exchanges were essentially “printing” fake ETH and BTC by adding them to people’s accounts in exchange for real cash transactions, without anyone having a physical wallet to store said ETH / BTC unless withdrawal was requested.
This leaves the possibility open that many of the exchanges may not even have physical (on-chain) BTC to back all that stored crypto on their exchanges, and instead would only acquire said BTC as needed when people make withdrawal requests.
I then went on to explain how all that “promissory crypto” could be one reason why there has been such a devaluation of crypto in general across the board (including on DeFi), and how it could devalue the cryptocurrency on other non-centralized exchanges due to the perceived price tag provided by CeFi exchanges.
Here is hoping I can get your opinions without being banned for raising a point.
Nothing stops all these central exchanges from conducting fractional reserve banking on cryptocurrencies, and devaluing the coins in the process.