Author: 0xJeff
Compile: Deep Tide TechFlow
2025 is a year full of challenges — although the U.S. president has promised to make the U.S. a global center for cryptocurrency and artificial intelligence, the cryptocurrency industry has gone through a tough year.
Since Trump took office in January this year, the crypto space has experienced a series of tense moments, especially the flash crash event in October that paralyzed the entire industry.
Although the chain reaction of the flash crash event has not been completely eliminated, the macroeconomic background and favorable factors in the industry have brought a positive quarter and optimistic outlook for 2026.
In this article, we will delve into the six major behind-the-scenes trends shaping the cryptocurrency industry and reveal the changes that may occur in 2026.
Let's start exploring ↓
- Prediction Market = The product market fit for crypto options
The prediction market (PM) industry recently set a new historical record for weekly trading volume, surpassing $3 billion for the first time two weeks ago.
We are witnessing the rapid expansion of prediction market types - from politics, sports, esports, pop culture, hot mention markets, to macroeconomics, cryptocurrencies, finance, corporate earnings, technology, and more, with an increasingly broad coverage.
Currently, platforms like @Polymarket and @Kalshi are positioned as general prediction markets, covering all exciting areas. Meanwhile, some emerging prediction markets, such as @trylimitless and @opinionlabsxyz, focus on more niche areas: Opinion focuses on macroeconomics, providing interest rate markets for the US, EU, and Japan; Limitless focuses on the cryptocurrency market, covering a wider range of crypto assets over different time frames.
Crypto options saw great popularity during the last bull market in 2021, but their appeal has significantly declined due to various challenges. The main issues include insufficient user interface/user experience (UI/UX) and a lack of liquidity.
The prediction market compensates for these shortcomings of options - it provides an intuitive and user-friendly interface, allowing anyone to easily place bets without needing financial knowledge; at the same time, it can effectively guide capital inflow by creating attractive markets, where anyone can become a market maker or participant (betting “yes” or “no”). Instead of struggling to understand the Greek letters and complex terminology in options, it is simpler to just buy “yes” or “no” shares.
Similar to options, people also use prediction markets as a tool to hedge the risks of core assets. For example:
Have a large amount of airdrop tokens but want to hedge the risk? You can purchase “No” shares in the relevant market.
Is your portfolio too heavily weighted in long positions? You can buy “No” shares in the macroeconomics or Bitcoin market.
Got it?
Prediction markets are essentially a repackaging of options into a product that is more accessible to the general public—a platform that anyone can participate in and benefit from. One of the main beneficiaries of this is the machine learning/prediction teams.
Prediction Market: The Perfect Testing Ground for Machine Learning Teams
Teams like @sportstensor, @SynthdataCo, @sire_agent, and @AskBillyBets are working hard to optimize their signal performance in the prediction markets.
Sportstensor, as the liquidity provision layer on the Polymarket platform, allows any prediction market trader to participate in prediction competitions and contribute signals. The best-performing signals will receive Alpha Token rewards, and these top signals will also be used to further optimize Sportstensor's prediction models for future commercialization.
$15000).
Sire is building an Alpha Vault, using the Sire model driven by SN44 Score data to bet in the sports market, with preliminary results showing a return rate of over 600%. This is currently the most outstanding prediction market DeFi vault product on the market and will be publicly launched soon.
Billy provides analysis and automatic betting features based on Billy's Sports Betting Insights (BCS). The team is exploring the liquidity advantages for Parlay-type bets on the Kalshi platform and plans to expand this strategy to increase the vault size (future profits will be returned to token holders once the vault reaches scale).
The charm of prediction markets lies in the fact that they provide an arena for various artificial intelligence models similar to “Darwinian competition,” where machine learning teams can participate and validate their strategies in a real-world environment.
Synth, Sire, and Billy can all participate in the competition of Sportstensor, and in the future, they can also join the “Market Battle” initiated by @aion5100 and @futuredotfun, which will take place on Polymarket and Kalshi.
What's cooler is that Polymarket is previewing the launch of Poly Token, while the emerging prediction market is also attracting liquidity and trading volume through token incentives. The machine learning team can not only identify pricing errors and arbitrage opportunities, but also “mine” to earn token rewards.
Does this remind you of the early days of Hyperliquid?
History is repeating itself, but this time the main character is the prediction market, not perpetual contracts (Perps).
- The battle of the new digital bank (Neobank$3000 ) has begun.
We are witnessing a transformation: mainstream Web2 startups and large enterprises are beginning to launch their own L1/L2 blockchains and integrate stablecoin payment rails to directly provide services to users. At the same time, crypto-native projects are also penetrating the realm of real-world financial services.
Teams like @ether_fi, @useTria, @AviciMoney, and @UR_global have launched non-custodial crypto payment cards that allow users to make offline payments directly using their crypto asset balances.
In just one year, this market has transformed from a blue ocean into a fiercely competitive battleground, with more than 20 to 30 heavyweight players vying for the same batch of crypto users.
Current differentiation competitive points:
Cashback/Rebate Ratio
Tria excels in this regard, offering the highest rebate rate, but requires an annual subscription fee.
Foreign exchange, transfer and ATM fees
Platforms are engaged in fierce competition over these fees.
extra benefits
Including travel, hotel membership levels, airport lounges, and event tickets.
Yield/DeFi Integration
Provide income features for idle funds, lending and payment functions, etc. EtherFi stands out in this area, offering high yields and lending payment functions.
Nevertheless, the underlying structure of most such products remains the same. They rely on partner banks/issuers holding Visa/Mastercard licenses, positioning the payment card as a front-end user acquisition tool rather than a true digital bank (Neobank).
Most cryptocurrency payment card projects still have limitations for the following reasons:
Compliance is controlled by the issuer/banking partner, rather than being independently managed by the project party.
The user balance is a virtual account, not a complete bank account.
Most services only stop at “crypto payment,” lacking fiat withdrawal or complete banking functions.
Currently, this model is still accepted by the market as all projects operate under similar constraints. However, as competition intensifies, projects with the capability to become a true bank may gain a decisive advantage.
Projects that can control their own compliance and regulatory systems will be able to offer more comprehensive services, including providing real bank accounts, supporting fiat deposit/withdrawal functions in multiple currencies, and seamlessly integrating cryptocurrency with traditional financial payment rails.
In this regard, UR (from the Mantle ecosystem) has taken the lead. It currently operates under the supervision of the Swiss Financial Market Supervisory Authority (FINMA) and holds a Swiss banking license, supporting seven fiat currencies as well as real-world and crypto financial services. Users can not only freely switch between crypto assets and fiat currencies but also transfer funds between the seven currencies through traditional banking channels.
- The explosive applications and use cases of the cryptocurrency industry are becoming increasingly clear.
Trading
Predicting
DeFi Yield Farming
Stablecoin
Asset Tokenization
We have gone through the development journey from centralized exchanges (CEX) to spot decentralized exchanges (Spot DEX), and then to perpetual contract decentralized exchanges (Perp DEX), and now Hyperliquid has become a leader in this field.
The launch platform (Launchpad) ultra-speculation model created by Pumpdotfun has led a wave of launch platform frenzy targeting various narratives.
Prediction markets have achieved “escape velocity” and have genuinely reached a mainstream audience for the first time. This phenomenon of widespread dissemination has not been seen since the NFT craze (when people were still mocking those “ugly JPEGs”). But this time, user attitudes have changed—they have really come to love prediction markets.
DeFi is gradually expanding to Wall Street through structured income products, interest products, stablecoins, real-world assets (RWA)/decentralized physical infrastructure networks (DePIN), and asset tokenization. People are beginning to realize that they can not only own a part of the future but also earn income through these assets, and even use them as collateral for loans.
All key crypto use cases are being amplified, and centralized exchanges (CEX) are starting to launch features similar to super wallet applications, such as Base App, Binance, and OKX, which are expanding their wallet capabilities to make it easier for ordinary users to get started. Meanwhile, ICOs (Initial Coin Offerings) are making a comeback—Coinbase has launched the first Monad ICO, while other launch platforms like Legion and Kaito are gradually gaining more user favor.
- Crypto AI has found an initial product-market fit (PMF)
The early development of crypto AI was filled with a plethora of mediocre projects—some AI concept coins and GPT shell products claiming to be “AI agents” emerged, but those days are gone.
Today, blockchain payment rails and stablecoins are driving commercial transactions between agents. At the same time, cryptographic technologies such as Trusted Execution Environments (TEE) and zero-knowledge proofs (zk proofs), combined with token economic mechanisms (incentives and penalties), make AI systems verifiable and deterministic.
Supportive tech stacks (such as x402, ERC-8004, programmable wallets, metering/billing frameworks, verifiable reasoning/computation, and other extended functionalities) are laying the foundation for trustworthy, continuous, and secure AI-human collaboration. These infrastructures are designed to enable seamless transactions and collaborations between AI and humans anytime, anywhere, while establishing protective mechanisms to prevent AI from experiencing “hallucinations” or going out of control.
At the same time, Darwinian AI has gradually emerged as an intriguing meta-layer model, evolving AI/intelligent agents through gamified competition, enhancing signal quality, and improving performance through real-world incentive mechanisms. Currently, the most successful applications are mainly focused on trading and prediction signal domains, which highly align with the core DNA of the cryptocurrency industry.
An increasing number of ecosystems are adopting this Darwinian model, using token incentives to attract developers, reward contributors, and subsidize the development of high-quality AI products. Although this field is still in its early stages, the Bittensor ecosystem has shown good momentum, with its top subnet performing particularly well.
However, despite the advancements in these technologies and their demonstration of product-market fit, the tokens of most crypto AI projects have failed to keep pace, with current trading prices generally 30% to 90% lower than their TGE (Token Generation Event) prices, even though they have delivered strong infrastructure and real utility.
- DeFi enters the “Dynamic DeFi Era”
DeFi has firmly established its position as a core pillar of the crypto industry, with the total value locked (TVL) in decentralized exchanges (DEX), lending platforms, yield products, and stablecoins exceeding $130 billion.
Based on programmable smart contracts, DeFi has verifiability, auditability, and high composability. Today's top protocols are among the most resilient systems in the crypto space. However, despite the tremendous success of DeFi, its underlying infrastructure has seen almost no significant changes over the past five years. Some key mechanisms, such as centralized liquidity provision and lending models, have not undergone substantial evolution.
Now, imagine a wave of brand new adaptive DeFi systems—these protocols can automatically leverage or deleverage, rebalance liquidity provider (LP) positions, or automatically enter or exit the market based on the predicted price trends of underlying assets.
This marks the arrival of the Dynamic DeFi Era, driven primarily by artificial intelligence (AI) and machine learning (ML).
Machine Learning Enhanced DeFi
@AlloraNetwork is a major player in this field, collaborating with top DeFi protocols to bring machine learning-driven intelligence into traditional DeFi systems:
Machine learning-driven centralized LP strategy
Adaptive Leverage/De-leveraging LP Management
Dynamic Yield Optimization Based on Proactive Risk Signals
Predictions and signals are generated by the Allora inference network, and AI/ML engineers receive token incentives by contributing models. This incentive mechanism follows a Darwinian AI incentive design, rewarding models with better performance.
AI-managed DeFi strategies
We also saw @gizatechxyz and @almanak launch AI-managed and AI-created DeFi strategies:
Giza, as an AI capital allocator, manages user funds across selected DeFi protocols and strategies.
Almanak allows AI agents to design and deploy tokenized DeFi vaults in minutes, tailored to the strategies specified by users. This makes Almanak both a capital allocator (introducing Total Value Locked, TVL, for DeFi projects) and a vault creation platform for fund managers.
As traditional finance further merges with DeFi, machine learning systems continuously enhance the core value and risk management capabilities of DeFi. AI strategy curators are designing increasingly complex strategies, and we may see DeFi expanding at a faster pace by 2026. This will unlock a more intelligent, autonomous, and adaptive financial layer for the internet economy.
Future Outlook
By 2026, we may see further integration between different narratives - cryptocurrency (Crypto), artificial intelligence (AI), decentralized finance (DeFi), real-world assets (RWA), decentralized physical infrastructure networks (DePIN), and robotics are merging into an interoperable digital economy run collectively by humans and intelligent agents.
DeFi is becoming more dynamic
AI empowers DeFi to expand to millions of new users
Cryptocurrency payment networks, stablecoins, and groundbreaking use cases will reach more users.
New digital banks (Neobanks) connect Web2 and Web3 users, integrating the two worlds together.
The predicted market size is expanding, and the machine learning team has become one of the core pillars of the prediction market.
Natural selection accelerates, and only a few cryptocurrency assets see price appreciation. Crypto projects may prefer IPOs (Initial Public Offerings) over ICOs (Initial Coin Offerings) to gain liquidity, legitimacy, and scaling support through traditional financial (TradFi) capital markets.
The next cycle = the period of deep integration between traditional finance (TradFi) and decentralized finance (DeFi).
Disclaimer
This article is for informational and entertainment purposes only. The views expressed herein do not constitute investment advice or recommendations. Readers should conduct their own due diligence based on their financial situation, investment objectives, and risk tolerance (which are not taken into account in this article) before investing. This article does not constitute an offer or invitation to buy or sell any assets mentioned.
