Basically the shady exchanges are insolvent and they stop cashing out real money, so peoples' only chance to cash out is to buy crypto and transfer it out, driving up crypto pricing on the insolvent exchanges, that greedy people try to arbitrage.
It makes sense when you consider that the population holding cryptocurrencies generally considers the USD worthless (you see that in some of the other posts here). USD are not an option. If Tether goes under, the next most stable reserve currency of the crypto economy is Bitcoin, so money flies out of Tether and into Bitcoin, pumping the price up.
[1] https://crypto-anonymous-2021.medium.com/the-bit-short-insid...
its not irrational, it is just pure fraud.
What you are describing is just people moving money to an exchange and buying with leverage, not fraud. Price moves up when large buyers step in with FOMO.