Or maybe just markets are stupid and bitcoin is mostly driven by hype based speculators

I think this would be covered by the "judgemental dismissal of market rationale" explanation I was talking about.

Because they self evidently are, markets are so self evidently irrational the concept of "animal spirits" is one of the first thing we learned in econ 101, almost every post about the stock market will have someone saying the market can stay irrational longer than you can stay solvent

unless you want to explain how what happened with gme reflected a rational valuation of the company

Markets are just collections of individual decision makers, making resource allocation decisions. If you want to understand "market rationale" you have to make some attempt to understand the why those individuals are making those decisions. When you do this, you tend discover perfectly rationale decision making. If you still want to call it irrational because you disagree with the motives of those decision makers, or you think they've made mistaken assumptions, or because their risk appetite exceeds your risk appetite, or because you simply think they're dumb, then all you're doing is using the word "irrational" wrong.

For instance your comment about GME seems to involve an intentional misrepresentation of what occurred, for the purpose of supporting a judgemental comment. All of the decision making involved was perfectly rational. The decision to short the stock is a perfectly rational risk to take based on the short sellers analysis of the business fundamentals. The decision to squeeze the stock is also a perfectly rational risk to take based on the knowledge that the short sellers would eventually have to close their positions. Your statement that the price of GME should have (in a rational world) reflected the value of the business is simple a misrepresentation of how the system works. The price of GME represents the demand for GME, and for a set of perfectly rational reasons, that price was temporarily misaligned with the value of the underlying business. I get the feeling you're trying to make some criticism about how the mechanics of the system work, but to do so under the pretence of irrationality is simply wrong.

And yet shorting exists and is hard, yet quite profitable. Sometimes the market gets it wrong because humans are fallible to herd mentality.

The question to ask is, do the fundamentals you mentioned justify the valuation?

> The question to ask is, do the fundamentals you mentioned justify the valuation?

Your mistake is to think that it should. The valuation is exclusively a result of the demand for the shares. Under typical circumstances that valuation will reflect "the market's" sentiment on the underlying business, in the context of the broader economy. But there are situations where the demand for shares can be temporarily influenced by factors other than the nature of the underlying business. The short sellers had contractually committed to having a certain level of demand in the future, and other market participants exploited this fact for their own benefit.

For that reason the price was temporarily misaligned with the underlying value. These temporary price fluctuations are a perfectly ordinary feature of any market, and can be caused by any number of different inefficiencies exerting a temporary influence on price before the market has time to correct itself. There's not much insight in commenting that a market is not perfectly efficient, because no market is. Events like this are remarkable because of their scale, but also because of how infrequently they occur. You could count all short squeezes of this scale on one hand. So what is the point of your comment? That massively inefficient pricing, while possible, almost never occurs?

I believe that is one of the desirable features!