Busting the myth of efficient markets

The content discusses the distinction between understanding market theories intellectually versus through real-world examples, likening it to watching MythBusters. Brian Armstrong from Coinbase illustrated this by referencing prediction markets during an earnings call, indicating he tracked the market sentiment about what he would say. This act sparked debate over whether it was a clever tactic or market manipulation. The article elaborates on George Soros’ theory of reflexivity, which argues that market prices can distort fundamentals instead of passively reflecting them. Soros suggests that financial markets actively shape their realities, citing historical financial trends where investor beliefs influenced market behaviors cyclically. He emphasizes that this reflexivity can lead to inaccuracies in perceived asset values, today exemplified by new digital asset treasuries. Ultimately, the distinction between theory and practice is highlighted through the lens of market behaviors and expectations, challenging the notion of efficient markets.

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