From my research, this is what I found: CEXs can issue out paper Bitcoin to traders, this paper Bitcoin can be used to settle an order book transaction (carry out trades), even when they don't have the Bitcoin backing it up.
This has actually happened before in this market, with FTX and Mt. Gox being examples.
Also, GBTC traded at massive premium over the value of the BTC it actually held for years, sometimes at 20-40%+ premium to NAV, as it was one of the easiest ways to gain regulated exposure to crypto when there were no spot ETFs available.
So some market distortion due to supply and demand for certain product does not necessarily mean exchanges are issuing unbacked BTC. Some people just wanted that GBTC wrapper badly enough that they were willing to pay way more for it.
bitcoin is bitcoin, there is no paper bitcoin but you can have things like figures which in theory represent your bitcoins in centralized exchange accounts, or Wrapped Bitcoin tokens that are tokens with pegs to Bitcoin price but those tokens are not actual bitcoins.
To expand on what OsaiEmma was saying, it does not even necessarily have to be shady CEX BTC. You could also argue that futures and derivatives markets like CME BTC futures can have large effect on BTC spot price. No actual BTC needs to change hands in such trades and cash settled futures contracts do not require BTC delivery. Nonetheless, through arbitrage and hedging opportunities, research has shown that derivatives exchanges contribute nontrivial amount to BTC price discovery, with leadership switching back and forth between spot and futures markets under different market conditions.
So BTC price is influenced by financial products that do not even claim ownership of BTC, regardless of fractional reserve risk posed by CEXs. So I guess this extends his argument somewhat.