In practical terms the potential virtual supply is not unlimited. The limit is the HBD supply, if all of it is converted there is no way to increase the virtual supply and therefore the current supply via that method.
Of course the dumping on Upbit did not increase the supply but rather it replicated a situation where the debt ratio exceeds the 10% limit and brakes the peg making it profitable to play the arbitrage game of buying HBD with the intent to convert.
I certainly do not disagree with any of your points. It is as clear as day that the existance of HBD introduces a volatile factor that determines the evolution of the HIVE supply outside of what is programatically set to happen.