"In a sense, I guess it could be like fractional banking."
Exactly right. You don't own title to anything, you just have a stored credit at the exchange.
I have been concerned about the Poloniex situation for a month. It doesn't really seem to have gotten sufficiently better. Since you can't withdraw there, some people think that is putting downward pressure on the price (have to sell there to move crypto off).
I believe that too. You must sell STEEM, for instance, to get it off there.