My favorite story along those lines was when I got paid $300 to own an exotic bass for a decade.
The bass in question: An Alembic 6 string fretless. Original retail price in 1991: $6800 ($14.4k inflation adjusted).
My local small town music store took it in on trade...tagged it at around $2500 or so... it proceeded to sit on the wall for the next 3 or 4 years. Owner of the store was a quirky older dude who doesn't do internet sales at all.
So, finally, I catch the owner in a good mood one day and say look - I'm the only guy with weird enough tastes in this town to ever buy that...but I can't afford it at that price. I'll give $1000 in cash, today.
...and he took it.
That was, if memory serves, about 2003.
Had a bit of cash crunch when I was laid off for about 6 months circa 2012 or so, and put up a few of my instruments at a high end consignment shop (but in a big city, with an actual instrument market). Even aftger their cut I ended up with about $1,350.
Then I saved up and got an American Fender Jazzmaster that's a recreation of one of the 60s models (cost around $2k used), and I can easily play that for 3-4 hours at a time without straining my hands. Everything just feels nicer in your hands because of the wood quality and you play better since it's more ergonomical.
I agree that you probably can't hear the difference between a Squire and a Fender unless you are really familiar with how guitars and the pickup electronics work and have really good musical hearing, however I'd say in general the cutoff for a good sounding guitar (that's almost indistinguishable from something in the $750 to $2k range) is around $400. Anything less than that and the quality of materials and wiring will probably be bad enough to be noticeable, or things will wear out sooner rather than later (and poor ergonomics can keep you from playing at your full potential).
There are exceptions to that though, I have a cheapo Washburn fretless bass that plays and sounds great, and I think I got it used for around $100.
Then above the low 4 figures you're getting diminishing returns and/or just getting a collectible instead of something you intend to actually make music with.