Written by: JW, Techub News
We often say that the cryptocurrency market is a "dark forest." If everyone holds a machine gun called "AI," will the forest become safer or will it be destroyed?
In recent days, the whole world has been talking about AI. Seedance's generated videos have exploded on Twitter, and in our circles, the topic of "cryptocurrency" seems to have been forgotten by the market, with all groups asking the same question: "What did your AI help you with today?" or looking for speculative projects based on AI concepts. But this article doesn't want to discuss this "shovel mentality" of looking for a few projects disguised as AI selling decentralized computing power; that is a matter for speculators. I want to talk about something truly sexy, even a bit terrifying.
Currently, social media is rife with various bloggers claiming: "The market is too boring; I'm trying to let the agent hunt for prey on-chain." This statement sends a chill down one's spine. We are accustomed to treating AI as an asset to trade, yet few truly stop to consider: if AI is not the object of speculation, but rather the opponent sitting across the table playing poker with you, how would the game play out?
That is the thought experiment I want to conduct with everyone today: When the trading entities in the cryptocurrency market shift from "humans" to "silicon-based lifeforms," and when retail investors, institutions, and market makers all hold a Gatling gun called AI, what will this dark forest look like?
What you think of as "quantitative" is merely a limping calculator
Before forecasting the future, it is essential to remove the most stubborn cognitive misconceptions. Even many seasoned investors still cannot distinguish between "quantitative" and "AI." In the comment sections of social media, we often see, "Aren't those automated trading bots just AI?"
That is a misconception. Currently, 99% of so-called "quantitative bots" on the market are essentially "Excel spreadsheets with automation features." Their thought processes are linear and rule-based: sell if RSI is above 80, and stop loss if it breaks below MA120. The problem with such rigid thinking is that it can't understand context.
For example: If tomorrow Vitalik suddenly tweets that the Ethereum Foundation is going to sell 100,000 Ethereum. A traditional quantitative bot would still be staring at the candlestick chart because the price hasn’t dropped, and the indicators haven’t turned bad; it might even trigger a "buy" signal due to a slight rebound, only to stop-loss amidst the losses when the waterfall actually comes. But a true AI strategy, within 0.5 seconds of the tweet, has already processed the tweet through an NLP module, the sentiment analysis determines "extreme panic," and the risk control module immediately issues instructions to clear long positions and short the market. At this point, the candlestick chart hasn't even had a chance to react.
Traditional quantitative trading looks for patterns in the "rearview mirror," while AI attempts to "predict the future" through vast amounts of data (data-driven). The current level of strategies akin to AlphaGo monitors the movements of thousands of on-chain addresses in real-time, analyzes the sentiments of hundreds of thousands of key opinion leaders, and may even discover a pattern you cannot comprehend: "Whenever Elon Musk changes his profile picture and gas fees are below 15 Gwei, the probability that DOGE will rise within 10 minutes is 87%." Such non-linear high-dimensional correlations can only be managed by neural networks. Therefore, comparing grid trading to AI is like comparing an abacus to a nuclear bomb.
What happens if everyone uses AI in the market?
Assuming that technology has been democratized, with retail investors using GPT-5 to assist in trading, and institutions using self-developed black box models. The judgment may be very pessimistic: we will face a monster market characterized by "extreme differentiation of liquidity" and "normalization of flash crashes."
Firstly, there is the "stagnation effect" brought about by absolute efficiency. In finance, there is a term called "efficient market hypothesis," and the current profitability in the cryptocurrency space is due to a substantial information gap—there are too many "fools." However, in an era of universal AI, even the tiniest arbitrage opportunity (such as a DEX price lagging behind a CEX by 0.1%) will be wiped out in microseconds by tens of thousands of AIs. This means a complete demise of technical analysis. Stop drawing lines; AI has seen the patterns a hundred million times already. For most of the time, the market will become stagnant, with prices precisely being outrageous, and volatility low enough to make you want to sleep.
Secondly, there is "synchronization" leading to super flash crashes. This presents perhaps the most frightening scenario. Although AI is smart, they all learn from the same materials (data). They all consume Binance’s candlestick data, rely on Etherscan's information, and read Bloomberg's news. With identical inputs and similar logic, will the outputs converge? When a specific signal appears in the market, thousands of top AIs worldwide may draw the "sell" conclusion simultaneously within the same microsecond.
Without human hesitation and the gambler's mentality, trillions of sell orders will suddenly flood the order book, leading to a direct evaporation of liquidity. Bitcoin might drop 90% in one second, only to be pulled back in another second when AI realizes it has underestimated the value. Such "algorithmic resonance" induced flash crashes, occurring 24/7 in a market without circuit breakers, will be apocalyptic in scale. Even more terrifying is that this kind of risk does not provide prior warnings. Everything happens due to threshold shifts within the models, rather than changes in public market sentiment.
Finally, there is the "Turing test" in the dark forest. Currently, market makers manipulate markets by drawing lines to deceive retail investors; in the future, market makers (institutional AIs) will be deceiving the AIs of their opponents. This will evolve into a form of "adversarial attack": the super AI of an institution deliberately creates complex, seemingly "accumulating" false moves on-chain to mislead the AI models of retail investors into issuing buy signals. By then, the on-chain will be filled with false noise, and the true signals will be completely buried in algorithmically generated illusions. This is no longer a financial market; it is an electronic arena for silicon-based lifeforms.
This situation could even extend beyond trading, infiltrating our proud "community governance" and "DAOs."
Imagine a newly emerging Layer 2 project starting to airdrop. In the past, there were "witch attacks," where one person controlled hundreds of wallets. This was relatively easy to defend against by checking correlations.
In the future? It will be AI-driven super witches.
Behind each wallet, there will be an independent AI agent. It will have its personality, its own Twitter account (that not only retweets but also plays jokes, and even argues with real users), and its own on-chain interaction habits (some may enjoy NFTs, some may prefer DeFi, and some may even intentionally incur losses to simulate real retail investors).
You won't be able to distinguish who is a real person.
When you enter a project's Discord or Telegram and find it bustling, with everyone discussing technology and calling out trades. But in reality, 99% of the accounts might be controlled by the same large holder's AI matrix. The so-called "consensus" is just a bubble generated by computational power.
Such a "social layer Turing test failure" is more terrifying than a price crash. It will destroy the foundational trust upon which Crypto relies. When the "community" becomes a set of codes speaking to themselves, Web3 will truly become a hollow shell.
Once trust collapses, the market will no longer be a battleground but will degenerate into pure computational collisions. At that time, prices will merely be byproducts, with the real competition being who can control the narrative entry and traffic distribution.
The "technical democratization" of retail investors is a false proposition
Surely someone will argue: "Institutions have AI, and I have it too! ChatGPT gives us a chance to challenge institutions."
Unfortunately, this is a bowl of poisonous chicken soup. In the realm of financial competition, the more technology advances, the higher the class barriers become. This is a thorough arms race. You may be using a MacBook Pro, while institutions use H100 clusters right next to the exchange's server room; your AI analysis takes 3 seconds, while the institution’s dedicated line only needs 5 microseconds. In the world of algorithmic trading, being 1 millisecond faster means winner takes all, while being 1 millisecond slower makes you a bag holder.
When you think, "I'm also trading with AI," feeling smug, in the eyes of institutions, you are simply upgrading yourself from "manual money delivery" to "automated money delivery." If the future cryptocurrency market turns into a pure battle of computational power and algorithms, retail investors will stand no chance. This is extremely harsh but irreversible.
The only way out is to escape the "blind spots" of AI
As I write this, it seems the road is entirely blocked. But precisely because AI is so powerful and so reliant on data, it exposes its fatal weakness. AI understands mathematics, probability, and logic, but it does not understand "madness," does not understand "faith," and does not understand "memes."
AI is trained on historical data; it can only predict variants of "things that have happened." But the most fascinating aspect of the cryptocurrency market is that it continually gives birth to things that "emerge from nothing." Imagine when PEPE first came out, or when BRC-20 inscriptions first started, the perspective of AI would classify this as "garbage code, lacking fundamentals, with infinite risk," concluding it should be ignored. However, the human perspective might see, "This frog is so magical, the community is so enthusiastic, even though I don't know what it is, it feels like it’s going to be popular," leading to an all-in decision.
In the phase of "0 to 1," in that chaotic moment when narratives are just budding, and emotions are just lifting off, is the blind spot of AI. Because there is no data there, only emotions. Only humans can empathize with human madness.
Thus, if the future truly involves everyone using AI, I believe the market will split extremely into two parts: one part will be the red ocean battleground of mainstream coins, where gods clash, institutional AIs attack each other, prices are exceedingly efficient, and retail investors find it hard to earn alpha; the other part will be the "human reservation" for memes and very early-stage projects, a no-go zone for AI, where humans capitalize on emotions to trade, create narratives, and harvest bubbles.
The end of trading turns out to be cultural. Once the candlesticks are calculated away, our only remaining advantage is that we understand what is "fun" and what is "community." AI cannot quantify the birth of a DOGE, because it can’t comprehend why humans would pay billions of dollars for a dog's meme.
The future’s threshold may become extremely high. We will either evolve into semi-cyborgs, learning code and algorithms to master tools; or revert to the wildest hunters, relying on intuition and insights into human nature to hunt. The worst are those caught in between, wielding outdated graphical tools, trying to find treasure in a new world.
This article is merely a thought experiment and does not constitute investment advice. After all, who knows, next month GPT-N PRO MAX might come out, able to speculate on memes too, and then we really will go deliver takeout together.
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