Thanks.
You're still ignoring the fact that there is a huge volume of poorly collateralized shorts out there, which means while BTS goes down the DEX price is permanently driven towards MSSR because of constant margin calling. Deriving the feed price from that skewed DEX price is what I'm primarily worried about, because it creates a dangerous feedback loop.
Also, I suspect that Chinese investors mostly do not invest in BTS, but they invest in BTC or other cryptos and use bitCNY/BTS merely as a vehicle. (I may be wrong of course.)
If large amounts of CNY enter the system that way, they will accept a worse-than-fair (less BTS per CNY and higher recharge rate) price, whereas when investors want to exit into CNY they will pay more BTS per CNY and accept a higher withdraw rate. Either way, the MagicWallet price will be skewed relative to the feed price. In a healthy market environment these differences would be resolved through arbitrage. Arbitrage is difficult here because of the general difficulty of investing CNY into cryptos. This only means that we must accept bigger differences, because with higher potential profits arbitrage will kick in at some point.
It is still debatable if the MagicWallet price reflects the fair price better than an external CEX. I see your logic there. At the very least though, the effect of margin calls on the DEX price must be taken into account.