Exchanges are platforms for users to trade currencies with other users.
The usual flow is that users deposits dollars, euros, bitcoins, or whatever into their account on an exchange, and then can use their account balance to offer a trade for whatever they want to acquire. The exchange merely offers the platform, matches and executes the trades, and facilitates deposits and withdrawals. The exchange itself is not participating in the trading. Since users can only trade whatever balance they have in their accounts, the exchange also guarantees that the counterparty actually has the available balance to enter the offered trade.
There is another distinct business model, called a brokerage, where users directly purchase from the platform. In that instance, the brokerage needs to have their own bitcoin on the balance sheet which they acquire e.g. from miners, exchanges selling off some of the trading fees they collected, or entities with large holdings.
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