It's not just about sound but also the way it feels in your hands when you play it. I had a ~$400 Squire Stratocaster as my main guitar that sounds great and is nearly indistinguishable from a Fender, but I had a hard time playing it for more than an hour at a time since it was hard on my hands (because of the quality of wood of the neck and fretboard, and I had trouble keeping the neck action where I want it).

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.