Theory of Reflexivity

The theory challenges traditional economic assumptions about market equilibrium.

It posits that market works on a two-way feedback loop between market participants' perceptions and the actual market fundamentals (Its co-depended).

The theory can be applied to Bitcoin markets also, as evident. When people think Bitcoin is going to increase in price, they buy more, which makes it go up even harder, which makes more people FOMO in, if even at higher prices - that's classic reflexivity!

People often give example of Housing debacle, that happened in '08 when everyone thought houses only go up. created a self-fulfilling prophecy... until it didn't.

This isn't just market theory - it reveals how our beliefs shape reality, which then reshapes our beliefs. Markets aren't just about numbers - they're about how human psychology and market reality dance together.

Applying reflexivity to Hyperliquid

We believe while the market partially considers existing flows from spot buyer, staking flows and assistance fund flows. It currently fails to consider the future flows unlocked by HyperVM, in form of utility flows via

• AMM pair assets

• Lending market pools

• Liquid staking pools

This new paradigm unlocks reflexivity to Hype, as its growth in fundamentals will lead to higher price and more value. This will lead to more growth lead in fundamentals, again leading to higher prices, sparking the cycle again.

This will carry on, till the market reaches an equilibrium, fairly pricing in all current and future flows.

Our fund General Partner George Zoros is a huge proponent of theory of reflexivity, and firmly believes it will fundamental driver for Hyperliquid ecosystem this year. Hence building Hedgewater's foundation.