What Crypto Investors Can Learn from Billionaire George Soros

One of the billionaire's most famous ideas might be even more important to understanding how the market functions, with or without his participation.

In simple terms, this theory states that investors base their decisions not on reality but on their "Perception" of reality.

Reflexivity connects any two or more aspects of reality, setting up two-way feedback loops between them.

Markets, he reckons, are in a constant state of divergence from reality and far from accurately reflecting all the available knowledge, instead representing almost a distorted view of reality.

How does his theory apply to the crypto market? For starters, we do see these feedback loops.

Crypto markets are just as prone to the phenomena of irrational exuberance, bias or opinionated actors as any other market, said Omri Ross, assistant professor at the University of Copenhagen and CEO of Firmo Network.

"In the young and volatile crypto markets, near-religious beliefs about price appreciation with references to various intrinsic valuation models can be observed daily."

"Conversely, institutional investors are keen to invest in the market, but in the absence of compliance, are remaining on the sidelines, contradicting this theory."

Nobody really knows what the long-term effect will be of Soros' entry into the crypto markets, only months after he joined other elites at Davos in calling bitcoin a bubble.

We can learn from his insights about the circular relationship between cause and effect, and the role of cognitive function in a new, developing and volatile market.