Does reality influence our perception, or does our perception influence reality?
Where we expect causal chains with cause and effect in reality we often observe causal loops or spirals, where self fulifilling prophecies and survivorship biases create effects and become their own cause.
Hyperrationl market participants should know that the past is no indicator for the future and the future is unknowable therefore responding to nothing else than momentary information. This would lead to commodity markets, in which every participant buys what they need for the fair price they can still operate marginally profitable. A lot of commodities are processed from other commodities, right up until the cultivation or mining of the most basic ingredients. The cost of claiming these unprocessed commodities would allow interpolating the fair market price of every good in existence.
Yet some companies operate at a healthy margin, because perceived value can be greater or less than the sum of the bill of materials. And this perceived value creates a paradox: If the fair market price is not derived from our reality, is reality a derivative of the markets?
This question is obviously bogus, but makes for an interesting thought experiment nonetheless: If the formula for fair market price is at its core a linear equation based on supply and demand, then the “real” formula for the “real” market price is weighted with multiple variables to account for perceived value. This would create a non-linear equation with many variables for emotions, speculation and false beliefs.
These variables represent the joint between our reality and the market’s reality. It follows: If the market can influence these variables, then our reality emerges from the market, not the other way around. And considering the fear of missing out, which drives a lot, if not all of investing, we can see a phenomenon first hand, that influences these variables.
Has Bitcoin any value? Has fiat currency? Or is its value emerging into our reality, because we are just living in the market’s first derivative?