It's a good theory. This is interesting because bitcoin is presented as a reliable store of value, but I bet a lot of people who trade on exchanges leave their

It's a good theory. This is interesting because bitcoin is presented as a reliable store of value, but I bet a lot of people who trade on exchanges leave their coins with the exchange for convenience. So - what if some operators hold less coins than they claim to have, and are shuffling around from a fractional reserve, as you describe? There would be more coins in the system than actually exist. I get lost in the M1/M3 representation of volumes of money, but that starts to reintroduce some of the confidence problems with paper money. But - if this problem exists - it will be temporary, and is not inherent to bitcoins. Either the ecosystem will evolve so people stop holding coins at the exchange, or there'll be a couple of run events causing a loss of confidence in exchanges for storage.