Author: Yan Krivonosov
Introduction. The main illusion
You show up at the exchange. You open the order book. You see green and red candlesticks. You think you're participating in a fair market where the seller and buyer of real Bitcoin meet.
But that's not the case.
You bring your actual dollars or USDT to the exchange. In return, you get... tokens.
Numbers in the database. A note on the screen. You have the feeling that you own Bitcoin, but in reality, you only own a promise. The exchange sells you air, while the real Bitcoin (the one on the blockchain) stays in their cold wallets — or it’s not there at all.
A simple formula to remember:
You give real money → receive a virtual record. The exchange can create as many records as they want. Infinitely.
Now add to this market makers who see your stop-losses, liquidate you at every turn, and manage the price through a single API. And ask yourself: why isn’t Bitcoin flying to the moon?
Economics says: there is demand and limited supply (21 million is sacred).
Reality says: the price has been stuck around $70,000 for the third year in a row.
Because these two conditions only work when the market is honest. And there’s no honesty on centralized exchanges (CEX). There's only a printing press.
Let's figure out how this works. We'll start with the simplest and end with specific examples that prove: exchanges are gods, and you are a player in their casino.
Part 1. How you buy IOUs and why it's profitable for the exchange.
Imagine you went to an exchange. You gave $100. They gave you a piece of paper that says '0.001 BTC'. You leave happy. Then it turns out that the exchange has no real gold — just a stack of such papers and a printer.
This is how CEX operates. Only instead of paper — it’s numbers in their internal database.
What does the exchange do?
You deposit USDT (a real stablecoin, though it’s not perfect). The exchange increases the number in the 'your BTC balance' cell. That's it. There may not be any actual movement of Bitcoin on the blockchain at all.
What does the market maker do?
He sits at the controls, sees all the orders through API, sees your stops and limit orders. He can 'draw' the price at any moment, provide liquidity, and take your money. Because he operates not with real coins, but with the same numbers in the same database.
Conclusion: as long as you keep Bitcoin on the exchange — it’s not your Bitcoin. It’s an IOU that the exchange and market maker can manipulate as they wish. And when you try to analyze charts, thinking you’re trading a limited asset, you forget the main thing — the supply of 'IOUs' is infinite.
That's why the price stays stagnant for years, even when news screams about institutional demand, ETFs, and government reserves.
Part 2. The Korean miracle: Exchange Bithumb gave away thousands of bitcoins out of thin air.
And now for the specifics. Proof that exchanges can indeed create any amount of BTC with a single line of code.
February 6, 2026. South Korean exchange Bithumb (the second largest in the country) held a 'Random Box' promotion. Users were supposed to receive a small reward — 2000 won (about $1.37).
But there was an 'error'. Instead of 2000, the system was told to credit 2000 bitcoins to each.
How many people received? According to various sources, from 100 to 695 users.
Consider the scale:
Let’s say, 100 people × 2000 BTC = 200,000 BTC.
If 695 people × 2000 BTC = 1,390,000 BTC.
At the current rate, that's from $14 billion to nearly $100 billion. All for one mistake.
What’s important to understand:
These bitcoins did not exist on the blockchain. They were just numbers that someone from the staff (or an automated system) recorded in the database. No on-chain transactions, no reserves.
What did the lucky ones do?
They instantly started selling these phantom BTC in the BTC/KRW pair. The price of Bitcoin on Bithumb plummeted by 15-17% in a matter of minutes — down to $55,000, while on other exchanges it was priced at $60,000+.
How did it end?
The exchange noticed after 35 minutes. It blocked the accounts of the 'miscredited' users. Trading and withdrawals were halted.
Bithumb 'reversed' 99.7% of what was sent out.
What’s the conclusion? If an exchange can accidentally credit users billions of dollars in virtual bitcoins — it can do so intentionally. Selling you these IOUs disguised as real coins. That's how 'paper Bitcoin' works on CEX.
Part 3. Sam Bankman-Fried and the collapse of FTX: a hole of $10 billion.
'Well, Bithumb is Korean, a technical error,' you might say. Okay. Then let's look at FTX.
This exchange was at the pinnacle of the crypto world. Its founder — Sam Bankman-Fried (SBF), the 'curly genius' adored by the media and investors. His fortune was estimated in the billions. His word was law.
How did it all end? In 2022, FTX collapsed in just a few days. It turned out that the exchange had a cash shortfall of $8–10 billion. Client funds were gone. They vanished.
How did the scheme work? SBF understood the main point we discuss at the beginning of the article: it’s not necessary to steal real bitcoins. It’s enough to print your own IOUs.
FTX had its own token — FTT. The exchange printed it in unlimited quantities literally out of thin air. Then, against these IOUs, through its trading firm Alameda Research, it withdrew real bitcoins and dollars from clients.
IOUs bought reality. When clients wanted to withdraw money en masse, it turned out that there were no real assets. Everything was air, numbers, IOUs.
What’s up with SBF now? In 2023, he was found guilty on all counts of fraud. In March 2024, he was sentenced to 25 years in prison. The judge added a confiscation of $11 billion for compensation to victims. Now the 'curly' is behind bars.
What's the takeaway? FTX is not an exception. It's a diagnosis of the whole centralized exchange system. They all operate on a fractional reserve model (and often without reserves at all). FTX just happened to crash loudly first. And until regulators take down a couple more of these 'gods', the market will remain a casino where market makers print IOUs and take your money.
Part 4. The paradox of price: why don’t we see $1,000,000?
Now let’s connect everything together.
· There is real Bitcoin. 21 million. Mining 450 BTC per day. It’s rare and hard to mine. · There is phantom Bitcoin. Which exchanges print in their databases. There can be as much as they want — 10 million, 100 million, infinity.
And while you trade on CEX, you’re dealing with the second type. Real Bitcoin lies in the cold wallets of smart people (and the exchanges themselves). And it hardly participates in price formation.
What do we see on the chart? Market makers draw the price. They pump it up when they want to gather liquidity. They drop it when they want to collect stops. And all this is on IOUs, not on actual coins.
So why is the average purchase price of Bitcoin rising? It used to be $10–20k. Now it’s $50–70k. Because real coins are gradually moving from weak hands to strong ones. Those who bought high aren’t selling at a loss. The market is 'washing out'.
But the real surge will only happen when the supply of IOUs disappears. This will occur in one of two cases:
People will massively withdraw bitcoins from exchanges. To their cold wallets (Ledger, Trezor, paper). While the coins are on the exchange — they are IOUs. As soon as you take them to your blockchain wallet — they become real. And the exchange loses the ability to manipulate them.
Another major exchange will collapse (or regulators will start putting people away). The market needs to clear. Once market makers understand that they can face real consequences for manipulations (like in the stock market), they will stop printing IOUs.
Part 5. Why I believe in $1,000,000
Despite this bleak picture, I’m confident: Bitcoin will be worth a million dollars. And here’s why.
Fundamental numbers:
· Miners mine only 450 BTC per day. · Strategy (formerly MicroStrategy) led by Michael Saylor continues to buy bitcoins in bulk. · The US government officially announced plans to create a strategic Bitcoin reserve and accumulate 1,000,000 BTC over five years.
These people (Saylor, governments, large funds) are not fools. They don't call Bitcoin a scam. Those who say 'cryptocurrency is needed by no one' are simply those who don’t understand the market or want to buy it cheaper.
In reality, laws are written, reserves are created, manipulations occur using stablecoins and exchanges — and all this happens because Bitcoin works.
What will happen when the IOUs run out? Imagine people finally realizing the truth and starting to withdraw bitcoins from CEX en masse. Exchanges will panic — they have very few real coins in their cold wallets, while billions worth of IOUs have been sold. They have nothing to cover their obligations.
The only way for them to acquire real bitcoins is to buy them from you. And you won’t sell. Because your average entry price is already $70k, and selling for $60k or even $90k is unappealing to you. They’ll have to pay $100k, $200k, $500k.
And then a supply shock will happen. The price will soar. Unexpectedly. Sharply. Just like it did in 2013, 2017, and 2021, but hundreds of times more powerful.
Conclusion. What to do right now
Stop believing that on CEX you are trading real Bitcoin. You're trading IOUs. Remember Bithumb and FTX.
If you have Bitcoin on the exchange — withdraw it. To a cold wallet. That’s the only way it truly becomes yours. That’s the only way you take liquidity away from the printing press.
Don’t sell. The spring is getting tighter. Governments and corporations are hoarding reserves. The average entry price is rising. Those who hold now will be rewarded.
Bitcoin is not a scam. The problem is centralized exchanges and market makers who print IOUs and manipulate the price. But the real Bitcoin (the one on the blockchain) is honest, rare, and inevitably expensive.
Once people realize this and start taking their coins back, we will see $1,000,000. The question is not 'will it happen'. The question is whether you’ll manage to accumulate enough real satoshis before the printing press breaks.
Have a good day and keep your keys where the market maker can't find them.