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by where_do_i_live 3111 days ago
Huh - that is nonsense. They hold the exact amount of USD that their customers have deposited. They are custodians - not fractional reserve banks.
1 comments

Well, they probably moved some of those funds into longer term bonds, so there could be some liquidity issues. But those would be unrelated to the price of BTC, and would be only temporary. There should never be solvency issues for a vanilla exchange.

Things look different with margin trading though. Margin trading implicitly implies a loan from the exchange to the trader. If the market moves too much against the trader, exchanges typically automatically force their positions to be closed. The problem is that if the price moves too quickly, the proceeds from this transaction may not be enough to cover the loan to the trader. So then the trader can end up owing money to the exchange, and it may be difficult for the exchange to get that money. That can lead to solvency issues.