Busting the myth of efficient markets

The article discusses the distinction between theoretical knowledge and experiential understanding, likening it to a physics textbook versus practical demonstrations. Utilizing a recent earnings call by Brian Armstrong of Coinbase, the piece illustrates George Soros' theory of reflexivity, which posits that market prices can distort actual value rather than merely reflect it. Armstrong's reference to prediction markets during the call highlights how market sentiments can shape reality and drive financial behaviors in a circular manner. Soros critiques the efficient market theory, arguing that investors' beliefs can inflate asset values, exemplified by 1960s conglomerate investments. This cyclical interaction between market perceptions and pricing is reiterated with modern examples in digital assets, showcasing how perceived value can perpetuate itself in markets. The article emphasizes the active influence of financial markets on asset valuation rather than them being passive indicators of worth.

Source 🔗