I think you know the simulation hypothesis. Our universe could be a simulation created by… well, let’s call them “gods”.
But, if the simulation continue, we, humans, may reach the point where we could create a simulation of our own universe. In which, the simulated people would reach the point where they simulate their universe, etc…
So, as a corollary, it is not possible to simulate the entire universe, because this imply simulating an infinity of entire universe. It is only possible to simulate a simpler, smaller universe at each “layer”.
So my question, are we at the top of the stack, or at the bottom ? Which would imply a much bigger and much more complexe universe above us.
If you are assuming we live in a simulation, then you have to assume everything else about it too - there is no evidence to point in any direction about anything higher than our own layer, so ours is the only one we can do science on. All else would be imagination, so make up whatever you like.
I do agree though that a simulator can’t fully simulate itself, so yeah, it would have to be bigger and more complex in at least some way, which could simply be runtime.