Looking forward to 2026: Six major structural forces are paving the way for the next cycle

# 2025: Trends Reshaping the Crypto Industry and a Preview of 2026

Author: 0xJeff, AI Investor

Translators: Dingdang, Odaily Planet Daily

2025 has been a challenging year for the crypto industry. Even though the current U.S. President once pledged to make the United States a global hub for crypto and AI, the crypto market has still struggled tremendously this year.

Since Trump officially took office in January, the market has experienced repeated periods of pressure. The most devastating of these was the flash crash in October, a plunge that nearly paralyzed the entire crypto sector.

While the ripple effects of this flash crash have not yet been fully resolved, macroeconomic conditions and favorable industry factors are pointing toward a more positive quarter and an optimistic outlook for 2026.

This article will delve into six underlying trends reshaping the crypto industry, offering an early glimpse of what 2026 might hold. Let’s dive in.

## 1. Prediction Markets: Crypto - Version Options Find Product - Market Fit

Prediction Markets (PMs) have recently achieved a breakthrough at the industry level. Two weeks ago, their weekly notional trading volume hit an all-time high of $3 billion for the first time.

We are witnessing rapid expansion in the types of prediction markets, spanning politics, sports, esports, pop culture, mention-based markets, macroeconomics, crypto, finance, earnings reports, technology, and more, with vigorous growth across all categories.

Platforms like @Polymarket and @Kalshi are evolving under the principle of “predicting everything”, covering all popular themes. Meanwhile, emerging PM projects such as @trylimitless and @opinionlabsxyz are digging deep into vertical niches. Opinion Labs focuses exclusively on macro markets, providing predictions for economic indicators like interest rates in the U.S., the EU, and Japan. Limitless, on the other hand, centers on crypto assets, offering markets with a broader range of tokens and more diverse timeframes.

Crypto options gained immense popularity during the 2021 bull market but subsequently declined due to multiple issues, the most critical being poor UI/UX and lack of liquidity.

Prediction markets have effectively addressed these shortcomings of options. They feature extremely user-friendly interfaces, enabling individuals with no financial knowledge to bet on any event. Additionally, by creating engaging markets to attract user participation, anyone can join as market makers and traders (betting on both “yes” and “no” outcomes simultaneously). Instead of grappling with a host of Greek letters and complex terminology, users only need to purchase “Yes” or “No” shares.

Similar to options, users can also utilize prediction markets to hedge their asset exposure.

For instance:

- Received a large airdrop but want to hedge in advance? Buy “No” in the relevant market.

- Have an overly large long position in your portfolio? Buy “No” in macro or BTC markets.

You get the idea.

In essence, prediction markets are repackaging options into a more accessible product that anyone can participate in and profit from. One of the biggest beneficiaries of this transformation is machine learning/prediction teams.

## 2. Prediction Markets: The Perfect Testing Ground for Machine Learning Teams

A growing number of teams are doubling down on prediction markets to refine their signals and models, such as @sportstensor, @SynthdataCo, @sire_agent, @AskBillyBets, and others.

Sportstensor serves as a liquidity provider layer for Polymarket, where any PM trader can participate in signal competitions. The top-performing signals are rewarded with Alpha tokens, and these signals are fed back into Sportstensor to further enhance its prediction models, paving the way for future profitability.

Synth is pursuing a “high-frequency hedge fund” model tailored for prediction markets. It uses its proprietary signals to forecast the 1-hour and 24-hour prices of crypto assets and places bets on prediction markets. Initial results show that it grew from $3,000 to $15,000 in one month, achieving a 500% return rate.

Sire is building an Alpha Vault that leverages Sire’s models and SN44 Score data for sports predictions, with initial results showing a profit and loss (PnL) exceeding 600%. It stands out as the top upcoming DeFi vault product designed for prediction markets.

Billy offers analytical and automated betting tools, drawing on the team’s sports betting insights (BCS). The team is seeking a competitive edge in Kalshi’s Parlays markets and planning to expand its strategies and vault scale. Future profits will be distributed to token holders once the vault reaches a predefined size threshold.

The allure of prediction markets lies in their inherent ability to foster multiple scenarios similar to a “Darwinian AI Competition”, where machine learning (ML) teams can validate their strategies in real-world market settings.

Teams like Synth, Sire, and Billy can all participate in Sportstensor’s competitions. Soon, they will also be able to join the “War of Markets” that @aion5100’s @futuredotfun plans to launch on Polymarket and Kalshi.

What’s even more exciting is that Polymarket is set to launch its Poly token, and new PM projects are using token incentives to attract liquidity and trading volume. Machine learning teams can simultaneously spot mispricings, engage in arbitrage, and capitalize on these token incentives.

Does this remind you of the early days of Hyperliquid?

The same pattern is unfolding again—this time in prediction markets rather than perpetual swaps.

## 3. The Onset of the Neobank War

A pivotal shift is underway: major Web2 startups and enterprises are launching Layer 1/Layer 2 blockchains and integrating stablecoin payment channels to serve users directly. At the same time, crypto-native projects are pushing into real-world financial services.

Teams such as @ether_fi, @useTria, @AviciMoney, and @UR_global now offer non-custodial crypto debit cards, allowing users to spend their on-chain assets directly in the real world.

In just one year, this market has transformed from a blue ocean into a crowded battlefield, with 20 to 30 heavyweight players vying for the same pool of crypto users.

Currently, product differentiation mainly centers on the following aspects:

1. Cashback/rebate rates: Tria offers the highest cashback but requires an annual fee.

2. Exchange rates, transfer fees, and ATM charges.

3. Loyalty programs (including travel perks, hotel upgrades, airport lounge access, and exclusive events).

4. Earn/DeFi integration (returns on idle funds, and loan-for-spending features): EtherFi leads in this area, providing high yields combined with the ability to borrow for consumption.

That said, most products share the same underlying structure. They rely on partner banks/issuers holding Visa/Mastercard licenses, so they function more as “user acquisition portals” rather than true neobanks.

As a result:

1. Compliance is overseen by partner banks, not the projects themselves.

2. Users’ balances are held in virtual accounts, not genuine bank accounts.

3. Functions are usually limited to “crypto spending”, lacking full fiat off-ramp services or comprehensive banking capabilities.

These limitations have had little impact so far since all players face them. However, as competition intensifies, the ability to become a “real bank” will become a core competitive advantage. Projects that can control their own compliance and regulatory frameworks will be able to offer authentic bank accounts, multi-currency deposit and withdrawal channels, and seamless integration between crypto and traditional finance.

In this regard, UR (from the Mantle ecosystem) has taken a leading position. Currently operating under FINMA supervision, it holds Swiss banking privileges, supports seven fiat currencies, and provides both real-world and crypto financial services (such as cross-border transfers across seven currencies within the traditional banking system).

## 4. Breakthrough Applications in the Crypto Industry Are Clearer Than Ever

The key breakthrough applications in the crypto space include trading, prediction, DeFi yields, stablecoins, and asset tokenization.

We have evolved from centralized exchanges (CEX) to spot decentralized exchanges (DEX), then to perpetual DEXs, and now entered the era of Hyperliquid.

The wave of “highly speculative launchpads” spearheaded by Pumpdotfun has spurred the rise of numerous narrative-driven on-chain launch platforms.

Prediction markets are growing at a brisk pace, successfully reaching mainstream users for the first time. Not since the NFT era have we seen such viral adoption, and this time users genuinely embrace the product.

DeFi has made inroads into Wall Street across various areas, including structured yield products, interest-bearing instruments, stablecoins, RWA (Real World Assets)/DePIN, and asset tokenization. People are increasingly recognizing that they can “own a stake in the future”, earn returns from it, and even use it as collateral for loans.

All key crypto applications are being further enhanced. CEXs are rolling out super wallet apps, such as Base App, Binance, and OKX. Other wallet providers are also rapidly expanding their features to make crypto more accessible to the general public.

Initial Coin Offerings (ICOs) are making a comeback. Coinbase has launched the first Monad ICO, and other platforms like Legion and Kaito are growing quickly.

## 5. Crypto AI Finds Product - Market Fit

In its early days, Crypto AI was dominated by AI meme coins and GPT-cloned projects that claimed to be “AI Agents”. Fortunately, these low-value projects have now faded away.

Today, blockchain payments and stablecoins are enabling automated transactions between agents. Cryptographic technologies like TEE (Trusted Execution Environment) and ZK (Zero-Knowledge Proofs), coupled with token-based incentive and penalty mechanisms, have made AI systems verifiable, controllable, and predictable.

Infrastructure layers (such as x402, ERC-8004, programmable wallets, billing frameworks, and verifiable inference/computation) are laying the groundwork for “seamless collaboration between AI and humans”. This infrastructure enables AI and humans to trade and collaborate seamlessly anytime and anywhere, while also providing safeguards to prevent AI from spiraling out of control.

Meanwhile, “Darwinian AI” has emerged as a meta-layer competition, driving agent evolution, signal optimization, and performance improvement through real-world incentives. Currently, the most successful use cases remain trading and prediction signals, which align perfectly with the inherent nature of the crypto industry.

A growing number of ecosystems are adopting this Darwinian model, using token incentives to attract developers, reward contributors, and subsidize R&D efforts, thereby promoting the development of higher-quality AI products. Although still in its early stages, several subnets within the Bittensor ecosystem have delivered impressive performances.

Nevertheless, the token prices of most Crypto AI projects have not reflected these positive developments. Many projects are still trading 30% to 90% below their Token Generation Event (TGE) prices, even as they deliver genuine infrastructure and practical utility.

## 6. DeFi Enters the Era of “Dynamic DeFi”

DeFi has long been a core pillar of the crypto industry, with a Total Value Locked (TVL) exceeding $130 billion, covering DEXs, lending platforms, yield products, and stablecoins.

DeFi’s strengths lie in its programmability, verifiability, and high composability, and top-tier protocols are among the most robust systems in the entire industry. However, the underlying mechanisms of DeFi have remained largely unchanged over the past five years. For example, concentrated liquidity market-making and lending mechanisms are relatively static.

But imagine this: What if new DeFi protocols could automatically adjust leverage up or down based on predicted asset prices, rebalance liquidity provider (LP) positions autonomously, and enter or exit markets automatically?

This marks the dawn of the “Dynamic DeFi” era, driven by AI and machine learning.

### DeFi Enhanced by Machine Learning

AlloraNetwork is a key player in this transformation. It is collaborating with top-tier protocols to infuse machine learning intelligence into traditional DeFi, including:

1. Machine learning-driven concentrated LP strategies.

2. Dynamic leverage management.

3. Yield optimization based on forward-looking risk signals.

These predictions and signals are generated by Allora’s inference network. AI/ML engineers can contribute their models and receive token rewards through a Darwinian incentive mechanism that favors higher-performing models.

### AI-Generated and AI-Managed DeFi Strategies

Teams like @gizatechxyz and @almanak are also pioneering new types of products:

1. Giza acts as an AI asset manager, intelligently allocating funds across multiple DeFi protocols.

2. Almanak enables AI agents to deploy tokenized strategy-based vaults within minutes, positioning itself as both a capital allocator (directing TVL into DeFi projects) and a vault creation platform for fund managers.

As traditional finance (TradFi) and DeFi integrate more deeply, machine learning will strengthen DeFi’s core values and risk management capabilities, while AI will design more sophisticated strategies. By 2026, we may witness accelerated DeFi expansion, as a smarter, more autonomous, and adaptive internet financial layer takes shape.

## What Lies Ahead?

In 2026, we are likely to see the convergence of multiple trends. Crypto, AI, DeFi, RWA, DePIN, and robotics are converging to form an interoperable digital economy co-operated by humans and agents.

Key developments to expect include: DeFi becoming dynamic; AI driving DeFi adoption among a broader user base; wider adoption of crypto payment channels, stablecoins, and core applications; neobanks integrating Web2 and Web3; continued growth of prediction markets with machine learning teams as core participants; and accelerated natural selection, where only a handful of assets will truly appreciate in value.

Crypto projects may increasingly opt for Initial Public Offerings (IPOs) instead of ICOs, seeking liquidity, compliance, and scale through traditional capital markets.

The next cycle will be defined by the deep integration of TradFi and DeFi.

### Disclaimer

The views expressed in this article are solely those of the author and do not constitute investment advice on this platform. This platform makes no guarantees regarding the accuracy, completeness, originality, or timeliness of the information contained in the article. Neither shall this platform be liable for any losses arising from the use of or reliance on the information provided herein.