2026 Crypto Market Outlook: Six Structural Forces Paving the Way for the Next Cycle

Author: 0xJeff

Compiled by: Ding Dong

The year 2025 will be a challenging one for the crypto industry - despite the current U.S. president's promise to make the U.S. a global center for crypto and AI, this year's crypto market remains very difficult.

Since Trump officially took office in January, the market has experienced moments of pressure time and again, the deadliest of which was the flash crash event in October – that plunge nearly paralyzed the entire cryptocurrency industry.

Although the chain reaction of this flash crash has not yet been completely resolved, the macro background and favorable industry factors point to a more positive quarter and a more optimistic outlook for 2026.

This article will delve into six trends that are reshaping the crypto industry behind the scenes, providing you with an early preview of what the landscape might look like in 2026. Let's get started.

1. Prediction Market = Crypto Version of Options Product Finding PMF

Prediction markets (PM) have recently made breakthroughs at the industry level, with their weekly nominal trading volume first surpassing $3 billion two weeks ago, setting a new historical high.

We see the market types rapidly expanding - politics, sports, e-sports, pop culture, mention-type markets, macroeconomics, cryptocurrency, finance, earnings reports, technology, and so on, flourishing comprehensively.

@Polymarket and @Kalshi are developing in the direction of “everything is predictable,” covering all popular topics; while emerging PM projects like @trylimitless and @opinionlabsxyz are delving deeply into vertical niches—Opinion focuses on pure macro markets, providing predictions for economic indicators such as interest rates in the United States, European Union, and Japan; Limitless focuses on crypto assets, offering a wider range of cryptocurrencies and richer time frames for the market.

Cryptocurrency options were all the rage during the bull market of 2021, but subsequently declined due to multiple issues, the most critical being poor UI/UX and a lack of liquidity.

The prediction market perfectly complements the shortcomings of options. It offers an extremely user-friendly interface that allows anyone without any financial knowledge to bet on any event; at the same time, it attracts users to participate by creating interesting markets, allowing anyone to get involved and become a market maker and trader (betting on both “yes” and “no”). Compared to understanding a bunch of Greek letters and complex terminology, you only need to buy Yes or No shares.

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

For example:

•Did you receive a large airdrop but want to hedge early? Go to that market to buy No.

• Is your investment portfolio too long? Go macro or buy No in the BTC market.

You know.

Prediction markets essentially repackage options into a more mainstream product that everyone can participate in and profit from, with one of the biggest beneficiaries being the machine learning/prediction teams.

2. Prediction market = The perfect testing ground for machine learning teams

More and more teams are increasing their investments in prediction markets, refining their signals and models, such as: @sportstensor, @SynthdataCo, @sire_agent, @AskBillyBets, etc.

Sportstensor is the liquidity provider layer of Polymarket, and any PM trader can participate in the signal competition. The best-performing signals can earn Alpha token incentives, and these signals will also feedback into Sportstensor to further enhance its prediction model for future profitability.

Synth follows the path of a predictive market version of a “high-frequency hedge fund,” using its own signals to predict the prices of crypto assets over 1 hour and 24 hours, and placing bets in the prediction market. Current preliminary results show - growing from $3000 to $15000 in one month, with a yield of 500%.

Sire is building an Alpha Vault that utilizes Sire's model and SN44 Score data for sports predictions, with preliminary results exceeding 600% PnL. It is the best prediction market DeFi vault product currently ready for public release.

Billy provides analysis and automated betting tools, leveraging the team's sports betting insights (BCS). They are looking for their own advantages in the parlays market on Kalshi and plan to expand their strategy and vault size (future earnings will be distributed to token holders once the vault size reaches a threshold).

The charm of prediction markets lies in their natural cultivation of multiple scenarios similar to a “Darwinian AI competition,” where ML teams can validate their strategies in a real market environment.

Synth, Sire, and Billy can all participate in the Sportstensor competition, and soon they will also be able to join the War of Markets planned by @futuredotfun on Polymarket and Kalshi, along with @aion5100.

What's cooler is that Polymarket is about to launch the Poly token, and the new PM projects are also attracting liquidity and trading volume through token incentives. The machine learning team can simultaneously find price discrepancies, engage in arbitrage, and conveniently take advantage of token incentives.

Does it remind you of the early days of Hyperliquid?

The same thing happened again, only this time it occurred in the prediction market instead of perpetual contracts.

3. Neobank War Begins

We see key changes: large Web2 startups and enterprises are launching L1/L2 and integrating stablecoin payment links to directly serve users. At the same time, crypto-native projects are also advancing towards real-world financial services.

Teams like @ether_fi, @useTria, @AviciMoney, and @UR_global are now offering non-custodial crypto spending cards, allowing users to directly spend on-chain assets in the real world.

In just one year, this market has transformed from a blue ocean into a crowded battleground, with 20-30 heavyweight players competing for the same batch of cryptocurrency users.

The current differentiation mainly focuses on:

• Cashback / Rebate Rate: Tria offers the highest cashback, but an annual fee is required.

•Exchange rates, transfer, ATM fees

• Rights System (Travel, Hotel Levels, Airport Lounges, Activities)

•Earn / DeFi Integration (Idle Fund Earnings, Lending Consumption): EtherFi leads in this direction, offering high yields + lending consumption capabilities.

Nevertheless, most of the products have the same underlying structure. They rely on partner banks / issuers holding Visa/Mastercard licenses, so they are more like “user acquisition gateways” rather than true Neobanks.

Therefore:

• Managed by cooperating banks in compliance, rather than by the project itself.

•The user's balance is just a virtual account, not a real bank account.

• The functionality usually stops at “crypto consumption,” lacking a complete fiat off-ramp or banking services.

Currently, everyone is affected by these restrictions, so the impact is not significant. However, as competition intensifies, whoever can become the “real bank” will possess a core advantage. Projects that can control their own compliance and regulatory systems will be able to offer real bank accounts, multi-currency deposit and withdrawal channels, and achieve seamless integration between cryptocurrency and traditional finance.

In this regard, UR (from the Mantle ecosystem) is a step ahead, currently operating under FINMA regulation, possessing Swiss banking privileges, supporting seven fiat currencies, and simultaneously supporting real-world and crypto financial services (such as transfers across seven traditional banking system currencies).

4. Breakthrough applications in the cryptocurrency industry are clearer than ever.

•Transaction

•Prediction

•DeFi Yield

Stablecoin

•Asset Tokenization

We have come all the way from CEX → spot DEX → perpetual DEX to the era of Hyperliquid.

The “super speculative Launchpad” wave led by Pumpdotfun has triggered the rise of numerous narrative-driven on-chain launch platforms.

The prediction market is developing rapidly, truly reaching mainstream users for the first time (we have never seen such viral spread since the NFT era, and this time people genuinely like this product).

DeFi has fully entered Wall Street in areas such as structured yield, interest products, stablecoins, RWA/DePIN, and asset tokenization. People realize that they can “own a part of the future” and earn returns on it (even using it as collateral to borrow money).

All key crypto applications are being further amplified: CEX is launching super wallet apps, such as Base App, Binance, OKX, etc., while other wallets are rapidly expanding their capabilities to make it easier for ordinary users to get started.

ICO is making a comeback - Coinbase has launched the first Monad ICO, and other platforms (Legion, Kaito) are also growing rapidly.

5. Crypto AI Find PMF

Crypto AI was initially dominated by a bunch of AI meme coins and GPT shell projects, which called themselves “AI Agents,” but now this noise has faded away.

Nowadays, blockchain payments and stablecoins are supporting automated transactions between agents; cryptographic technologies such as TEE and ZK, combined with token incentives and penalty mechanisms, make AI systems verifiable, controllable, and predictable.

Support layers (such as x402, ERC-8004, programmable wallets, billing frameworks, verifiable reasoning/computation) are laying the foundation for “seamless collaboration between AI and humans”. The infrastructure enables AI and humans to trade and collaborate seamlessly anytime and anywhere, providing protective mechanisms to prevent AI from going out of control.

At the same time, “Darwinian AI” is emerging as a meta-layer competition, driving agent evolution, optimizing signals, and improving performance through real incentives. The most successful use case so far remains trading and predictive signals, which closely aligns with the genes of the crypto industry.

More and more ecosystems are adopting this Darwinian model, using tokens to incentivize developers, reward contributors, subsidize research and development, and promote higher quality AI products. Although it is still in the early stages, some subnets of the Bittensor ecosystem have already shown impressive results.

Nevertheless, the tokens of most Crypto AI projects have not reflected these advancements simultaneously—many projects are still 30–90% lower than their TGE price, even though they are delivering real infrastructure and actual utility.

6. DeFi enters the “Dynamic DeFi” era

DeFi has long been a cornerstone of the crypto industry, with a TVL exceeding 130 billion dollars, encompassing DEX, lending, yield products, and stablecoins.

The advantages of DeFi lie in its programmability, verifiability, and high composability, with top protocols being the most tested systems in the industry. However, the underlying mechanisms of DeFi have remained largely unchanged over the past five years, with centralized liquidity market-making or lending mechanisms being relatively static.

But now imagine this: what if a new DeFi protocol could automatically leverage/de-leverage based on the predicted price of the underlying asset, automatically rebalance LP positions, and automatically enter and exit the market?

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

Machine Learning Enhanced DeFi

@AlloraNetwork is a core player, collaborating with top protocols to inject machine learning intelligence into traditional DeFi:

•Machine Learning Driven Centralized LP Strategy

•Dynamic Leverage Management

•Yield optimization based on forward-looking risk signals

These predictions and signals are generated by the Allora inference network, where AI/ML engineers can contribute models and receive token rewards through a Darwinian incentive mechanism, which rewards models with better performance.

AI-generated and AI-managed DeFi strategies

@gizatechxyz and @almanak are also promoting a new type of product:

•Giza is an AI asset manager that intelligently allocates funds across various DeFi protocols.

•Almanak allows AI agents to deploy tokenized strategy Vaults in just a few minutes, making it both a fund allocator and a strategy creation platform. This enables Almanak to serve as a capital allocator (bringing TVL into DeFi projects) as well as a treasury creation platform for fund managers.

As TradFi and DeFi become more deeply integrated, machine learning enhances the core values and risk management of DeFi, and AI designs more complex strategies. We may see a faster expansion of DeFi by 2026, with a smarter, more autonomous, and more adaptive layer of internet finance emerging.

What comes next?

In 2026, we may see the convergence of multiple narratives – Crypto, AI, DeFi, RWA, DePIN, robotics, and more are coming together to form an interoperable digital economy run jointly by humans and agents.

•DeFi becomes dynamic

•AI drives DeFi to expand to more users

• Cryptographic payment links, stablecoins, and key applications gain a larger user base.

•Neobank integrates Web2 and Web3 into one.

• The predicted market size continues to grow, with the machine learning team becoming a core component.

Natural selection accelerates, and only a few assets can truly appreciate.

Cryptocurrency projects are more likely to choose IPOs rather than ICOs to obtain liquidity, compliance, and scale through traditional capital markets.

The next cycle = the deep integration period of TradFi and DeFi.