[mgbmtl]

Thanks. Makes sense. I guess the "instant buy" on some exchanges gave me the impression that they kept coins in stock. (edit: I just saw the other comments regarding Coinbase, which answer that issue)

However I'm a bit confused by:

> An unsustainable price of bitcoin will lead to the collapse of other exchanges since people cashing out on these exchanges requires enormous amount of real money.

To cash out, other people need to buy, typically with fiat currency, so it's unlikely that their bank accounts would empty overnight? (assuming no fraud, bugs, not running the exchange at a loss, etc)

[pbhjpbhj]

>To cash out //

Isn't the problem that an exchange can [pretend to] credit your account to the tune of $n million, use your bitcoin to sell for that amount, then keep/use the proceeds of the sale.

This is what traditional banks do with fractional reserve banking, except here the fraction of your bitcoin held is zero ;0).

Also, if bitcoin plummets you're probably not going to be happy when the exchange says "oopsies, our bad, that transaction failed, here's your bitcoins back".