The exchange is not the market maker (it can be, but not always.) If Coinbase is making the market prices by leaving large limit orders at certain prices, and

The exchange is not the market maker (it can be, but not always.) If Coinbase is making the market prices by leaving large limit orders at certain prices, and Coinbase limit runs out, then the price moves past their limit. It's as simple as that. Nobody can place limit orders with money they don't have (I understand there is a "margin trading" option, but I don't have that enabled on my account and I'm uncertain how many accounts on GDAX do have that feature.) If Bitcoin price goes up, that just means that the supply of Bitcoin at a lower price point has evaporated. Coinbase is not buying and selling coins (let's assume, but also assume that if they are buying and selling, they play by the same rules as everyone else. No imaginary wallets.) The exchange are just playing matchmaker so that Market Order X that crosses Limit Orders Y, Z, P, Q, R... that intersect, are all matched and executed together. Then, GDAX can collect a fee from the person who placed the Market order, and GDAX Limit orders are fee-free. Coinbase-proper is 100% market orders with a slightly larger fee, so they can clean up even more on each transaction there, because Coinbase still does not need to sell some of their own currency for each buy; they are just the matchmaker. Coinbase and GDAX are the same company. If Coinbase needs some of GDAX's liquidity so that it can match Coinbase customers with GDAX's limit orders, they can do that opaquely. The customers do not need to know where their cryptocurrency came from exactly. If all of the liquidity on GDAX dries up, then there will be a problem (but still, the problem/opportunity is not Coinbase's problem, it is the whole market that comes grinding to a halt until someone opens up some more liquidity at a particular price point.)