Will the encryption industry be good in 2026?

Abstract: This article will discuss the future of the encryption industry after the structural changes. Author: Viee Xiao Wei I Biteye Content Team

In the last few months of 2025, the atmosphere of the bear market began to spread. Bitcoin has fallen from a high of $120,000, ETF inflows have once been interrupted, and the performance of various cryptocurrencies has diverged, with once-popular Meme coins now neglected. Compared to the end of 2021, there hasn't been a sudden regulatory crackdown this time, and aside from the significant drop on October 11, there doesn't seem to be a severe liquidity crisis, yet it still feels like something is off. If the cryptocurrency world of 2025 is a recalibration of true and false value, will cryptocurrency be better in 2026? This article attempts to seek answers; perhaps we need to accept a fact that the encryption industry may be entering an era no longer driven by unilateral rises or the “casino narrative.”

1. The macro trend is warming up, and Bitcoin still stands at the forefront. In the past year, the price performance and market positioning of Bitcoin have changed significantly. After hitting a historical high of $120,000, the market began to pull back, with increased volatility and a gradual cooling of market sentiment. Unlike the previous rallies driven by retail investors, the main force behind this round of increases is the institutional funds behind ETFs. From the perspective of holding costs, CryptoQuant analyst Axel Adler Jr. pointed out last month that the average holding cost of U.S. ETFs is $79,000, which many consider to be one of the support ranges for the price. Therefore, Bitcoin's current trend increasingly resembles a high-volatility institutional asset, having an anti-inflation positioning similar to gold on one hand, and being influenced by macro sentiment and risk appetite like tech stocks on the other, displaying β attributes. From a more macro perspective, 2025 is expected to be a year of recovery for global risk assets. AI is the biggest theme, US stocks are continuously hitting new highs, and the Federal Reserve announced three rate cuts in December, bringing the market back into a phase of warming liquidity expectations. The FOMC's economic forecast at the end of the year shows that the GDP growth rate expectation for the US in 2026 has been raised from 1.8% to 2.2%–2.5%. There is a general expectation that there will be continued easing next year, which may be favorable for assets like Bitcoin. But the market is not without risks. If the economy suddenly weakens in 2026 or if inflation unexpectedly rebounds, risk assets may still face significant adjustments.
2. Regulatory Turning Point: Policy Trends in the United States and Hong Kong Another important change in 2025 is the formal framework of regulation. In the United States, two key bills have been enacted. The first is the Stablecoin Bill (GENIUS Act), which clarifies the definition of stablecoins, reserve requirements, and issuance qualifications, providing a compliance pathway for mainstream stablecoin issuers. This bill was signed into law by the President in July 2025 and will take effect 18 months after signing or 120 days after the regulatory agency releases final rules. The second is the Cryptocurrency Market Structure Bill (CLARITY Act), which systematically delineates the boundaries between “security tokens” (regulated by the SEC) and “commodity tokens” (regulated by the CFTC), and proposes tiered regulation. This bill will be submitted to the Senate for review in January and may also require the President's signature, with the effective date to be determined. Meanwhile, the SEC is also accelerating the approval of more cryptocurrency ETFs, opening channels for institutional products. In Hong Kong, regulatory measures are also accelerating. In 2025, the Monetary Authority will introduce a regulatory framework for stablecoin issuers, clearly requiring that all Hong Kong-based stablecoin issuances must be licensed. This means that in the future, issuing stablecoins such as USD and RMB in Hong Kong will need to meet certain capital and compliance requirements. In addition, HashKey has been listed on the Hong Kong Stock Exchange, becoming the first compliant platform with a core business in encryption trading to IPO in Hong Kong, marking a milestone. Overall, the regulatory trends in the US and Hong Kong are aimed at both curbing illegal speculation and opening channels for legitimate business, promoting the industry's evolution towards institutionalization and compliance.
3. The three main lines: stablecoins, prediction markets, and on-chain US stocks. In the past few years, the most stable growth curve in the encryption industry has actually been stablecoins. By 2025, the global issuance of stablecoins has exceeded $300 billion, with USDT and USDC accounting for over 80% of the total. Stablecoins are becoming part of the global payment network, and whether it is USDT or USDC, the use cases for these stablecoins have penetrated into everyday merchants and cross-border settlements. In 2026, stablecoins are likely to be closer to the real world than ever, with traditional giants like Visa, Stripe, and PayPal already using stablecoins for settlements. For example, Stripe has already supported merchants in subscribing with stablecoins, and there are real services implemented.

Image source: a16z In addition, with clearer regulations, government bond-backed stablecoins (backed by high-quality assets) are expected to emerge, such as the digital currency bridge projects promoted by Japan and the European Union. Another area worth paying attention to is the prediction market. Initially, most people thought that prediction market products were too niche or not compliant. However, it has slowly started to become a combination of “on-chain betting + pricing tools” under themes such as the US elections, sports competitions, and economic data. For example, Kalshi has obtained an official futures license from the CFTC in the United States, allowing it to legally launch prediction trading related to macroeconomic data. Its current valuation has risen to 11 billion dollars. Meanwhile, Polymarket has become a place for many users to bet and observe public sentiment, relying on topics such as the U.S. elections and entertainment events. The prediction market in 2026 may step out of the pure speculation circle, where users are not just betting on wins or losses, but are voting with their money to express their judgments on the probability of a certain outcome occurring. This pricing method based on collective wisdom could potentially be referenced by media, research institutions, and even trading strategies. In addition, AI will also open up new possibilities for prediction markets, allowing them to no longer rely solely on human betting, but to automatically analyze data, place orders on their own, and even generate new betting lines. This will enable prediction markets to respond faster and smarter, gradually transforming into a tool for assessing risks and trends, rather than just a place for betting on wins or losses. The last point not to be overlooked is the development of on-chain US stocks. In simple terms, the encryption industry is now not only trading encryption assets but also starting to move real-world assets onto the chain. For example, the company Securitize plans to launch the first fully compliant on-chain stock trading platform in 2026, where the tokens purchased on the chain correspond to real company stocks, allowing users to enjoy voting rights and dividends. IV. Emergence of New Narratives: New Directions That May Take Off in 2026 At the same time, there are a number of seemingly marginal directions that can be focused on, the following content is referenced from a16z's latest report “17 Exciting Directions in the Encryption Industry for 2026”.

Image source: a16z

1. Identity Issues of AI Agents As AI entities begin to participate in trading, browsing, placing orders, and even interacting with smart contracts, a key question arises: how can these non-human identities prove “who they are”? The “Know Your Agent” (KYA) concept proposed by a16z is precisely aimed at solving this issue. On the chain, any agent wishing to initiate a transaction must have clear permissions and ownership, and will need encrypted signatures for the credentials to transact. By 2026, this may become a prerequisite for the large-scale deployment of AI on the chain.
2. x402 protocol and micropayments a16z predicts that as AI Agents extensively trade data, invoke computing power, and read interfaces, we will enter an era of “automated settlement + programmable payments.” No more manual payments are needed; AI Agents can recognize demands and automatically execute payments, which is precisely the real-world problem that protocols like x402 are addressing. By 2026, their presence will become increasingly strong.
3. Privacy chains will receive more attention. a16z pointed out a key trend: compared to the convergence of performance competition, privacy will become the core moat of future public chains. In the past, people worried that privacy chains were detrimental to regulation and lacked transparency. But now the problem has reversed; business data is too sensitive, and without privacy protection, regulatory agencies simply do not dare to go on-chain. Because of this, chains that come with privacy protection by default are starting to become attractive. Once users adopt these chains, their data will not be easily leaked, and the cost of migration will also be higher, naturally forming new user stickiness, which is actually a kind of network effect.
4. Staked Media In the era of AI-generated content, determining whether a statement is credible cannot rely solely on who is making it, but also on whether there is a cost associated with what they are saying. Therefore, a16z proposed a new media model where content creators not only speak out but also 'stake' their positions through mechanisms such as locking assets, prediction markets, and NFT certificates. For example, you express a bullish view on ETH while simultaneously locking up the ETH you hold as collateral; you make an election prediction and also place your bet on-chain. These public interest bindings will make content no longer just empty talk. If this approach can be successfully implemented, it may become the new norm for on-chain media in the future. Of course, the directions proposed in the a16z report are far from limited to just a few. This article focuses on four trends that we believe are more representative, while other directions are also worth noting, such as: upgrades to stablecoin inflows and outflows, RWA encryption native integration, stablecoin-driven upgrades to banking ledger systems, diversification of wealth management, the rise of AI research assistants, real-time content profit-sharing mechanisms for AI agents, decentralized quantum-resistant communication, “privacy as a service” becoming an infrastructure, shifts in DeFi security paradigms, intelligent prediction markets, verifiable cloud computing, emphasis on product-market fit (PMF), and encryption legislation that will unleash more potential for blockchain. Interested readers can refer to the original report by a16z for further insights.
5. The encryption industry is emerging from its internal cycle. The early growth of the encryption industry was largely built on a self-reinforcing system, with token issuance, commissions, and airdrops all trying to attract more insiders to stay. However, this closed loop is gradually being broken by reality. From Polymarket to USDT, and then to USDC's cross-border applications, we see more and more people who are not Web3 users using blockchain tools. Street vendors in Lagos may not understand wallet structures, but they know that using USDT is much faster than bank transfers. In high-inflation countries, savers flock to USDC, not for speculation but to hedge against risks. One of the most intuitive changes appears in the payment scenarios of developing countries, such as the partnership between the exchange Coins.ph in the Philippines and Circle to open low-cost USDC remittance channels. The trend behind this indicates that encryption technology is being embedded in real scenarios such as cross-border payments and remittance channels. The true future of encryption may lie in how to use technology to solve real problems, allowing more ordinary people to unconsciously use blockchain.
6. The Encryption Industry from the KOL Perspective The recent discussion about “whether spending years in the encryption industry is worth it” is essentially a collective review of the industry. Castle Island Ventures partner Nic Carter @nic_carter continued his reflection on “whether encryption has wasted 8 years,” admitting that only Bitcoin, stablecoins, DEX, and prediction markets have truly achieved significant PMF (Product-Market Fit) to date. He chooses to maintain a pragmatic idealism, accepting that bubbles and enthusiasm are part of the journey, but not the entire story. Dragonfly partner Haseeb @hosseeb is more straightforward in saying that the problem is not the existence of casinos, but that if we only focus on the glamour of casinos, we will miss the real transformation in the industry. He believes that encryption is a better vehicle for finance and will forever change the nature of money. He hopes the industry remains patient: “The industrial revolution also took 50 years to change productivity, and we have only been at it for 15 years.” The summary by @DeFiTeddy2020, the founder of XHunt & Biteye, is also extremely real. In his view, the encryption industry can quickly expose the essence of finance, facing project zeroing, disconnection between price and fundamentals, and even insider information, manipulation, and harvesting. It is not a breeding ground for idealism, but rather a market that continuously educates participants with real money, which is very mentally challenging. In terms of the future development direction of the industry, KOL cryptocurrency guru @xincctnnq provides a long-term perspective. What encryption is truly trying to solve are long-term issues such as the monetary system, contract execution, digital property rights, capital market efficiency, and financial inclusivity. Even if the results are distant and the process is rough, it is worth continuous attempts. In addition, trader & analyst @CryptoPainter provided a more market structure-oriented explanation, stating that the encryption market repeats its consistent operating mechanism: “value investing” - “belief investing” - “emotional speculation” - “complete disappointment”, and then starts over. This cycle has occurred in 2018 and 2022, and is destined to come again. Gamblers and casinos are not anomalies, but rather a part of consuming bubbles and completing the market's self-regulation. The stance of Figment Capital member DougieDeLuca @DougieDeLuca seems to be a summary of a phase. He bluntly states that “Crypto is dead” does not mean that prices have hit zero or that blockchains have stopped operating, but rather that “Crypto as a closed industry is fading away.” True success should be integrating Crypto technology into the everyday lives of ordinary people. From a more institutional perspective, KOL & researcher Blue Fox @lanhubiji mentioned that when long-time users begin to withdraw, newcomers with traditional financial backgrounds are entering the market. In their perception, encryption is a long-term trend that has already entered a path of standardization, interoperability, and scaling. Three years from now, a brand new era of on-chain finance, the on-chain Wall Street era, will gradually emerge. The judgment of LD Capital founder Yi Lihua @Jackyi_ld is more aligned with the current cyclical perspective. He pointed out that the recent slump in encryption is more of a phase resonance of liquidity and macro events. Currently, the negative factors are gradually being digested. With the dual benefits of interest rate cuts and encryption policies, he remains optimistic about the subsequent market trends. At a more macro level of regulation and industry structure, Hashkey Group Chairman Xiao Feng's judgment is particularly systematic. He has put forward three major trends for the future: First, the global encryption regulatory trend is shifting from “voluntary acceptance” to “mandatory management,” with governments gradually eliminating offshore gray areas and moving towards licensing of encryption trading. Taking Hong Kong as an example, starting from June 2023, all unlicensed exchanges are required to exit the market. Second, encryption is no longer just about native assets like BTC and ETH; more traditional financial assets are migrating to the chain in the form of tokenization, forming a new type of securitization market that is compliant with regulations. Thirdly, moving from “off-chain” to “on-chain”, he predicts that the second half of 2026 may be a key node for the emergence of the prototype of “on-chain Wall Street.” Seven, Conclusion Will encryption be good in 2026? If what you expect is for the “coin price to soar”, then the answer may be not necessarily. But if the question is whether this industry is moving towards a more authentic and useful direction, then the answer may be yes. From encryption ETFs to stablecoin payments, from on-chain government bonds to prediction markets, from on-chain Agents to decentralized AI, all of these indicate one thing: The encryption industry may begin to transition towards a more realistic world, and it may increasingly resemble a twin financial system that runs parallel to the real-world financial system, resonating with the stock market, macro liquidity, policy expectations, and even the AI cycle.