Yeah, I also think that Coinbase (and Binance) are running the fractional reserve playbook. Maybe not as bad as the banks - which have a 0% reserve requirement since COVID - but there is 0% chance they have all the bitcoin that their customers have “bought” using their platforms.
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While you're probably right, I don't think they have to "have" the bitcoin. They can facilitate the transaction and the transfer of the key ownership. As defined in the contract.