AI Trading Empowers Fluctuation in the Crypto Market: Technical Advantages and Prospects of Olfaction Protocol

In the second half of 2025, the crypto market experienced significant fluctuations: mainstream assets all retreated after recent highs, with the total market capitalization briefly falling below 4 trillion dollars. Bitcoin has risen approximately 32% year-to-date, currently fluctuating between 110,000 to 120,000 dollars. Ethereum briefly broke through 4,400 dollars driven by ETF and institutional funds, but fell back as the market took profits, maintaining a support level above 4,000 dollars. The market trading volume has contracted, indicating that investors are cautious and have paused chasing the price.

Increased volatility: On one hand, macro factors such as the Federal Reserve's policy expectations and inflation data (July core CPI remains at 3.1%) have increased the volatility of crypto assets; on the other hand, early ETF inflows (such as BlackRock's Bitcoin ETF) and institutional layouts have become important support. The industry generally believes that the current pullback is more of a profit-taking process for investors, rather than a trend reversal.

Investor sentiment: Bullish views still exist, believing that the corrected Bitcoin and Ethereum bull market foundation remains solid. Amid a wait-and-see attitude, new buying mainly comes from expectations of crypto-friendly regulation and long-term allocation. There is clear technical support below the current price, and multiple institutions are optimistic about Bitcoin continuing to reach new highs by the end of the year, while Ethereum is generally viewed positively with more institutions entering and market demand.

Hot sectors: The market hotspot structure has shown differentiation: MEME coins driven by social sentiment are particularly active. Research shows that from January to May 2025, the average return of the MEME token sector reached +33.08%, leading the entire market; in contrast, sectors such as Layer 1, decentralized trading, artificial intelligence, and Layer 2 have all shown varying degrees of decline during the same period. The decentralized finance (DeFi) ecosystem has stabilized overall as prices have retraced and regulatory scrutiny has increased, while themes like "real asset tokenization" (RWA) continue to ferment. Overall, market risk appetite has receded, with investors paying more attention to the fundamentals and compliance attributes of assets, shifting from last year's "risk-chasing" style to "selecting assets and stable returns."

The value of Olfaction Protocol's AI trading infrastructure

Olfaction Protocol is a multi-chain AI-driven automated trading platform designed to provide a new generation of trading agents for the Web3 financial ecosystem. Its core concept is to break through the efficiency and transparency bottlenecks of traditional trading by combining deep learning and predictive analytics. In terms of technical architecture, Olfaction supports cross-chain deployment, allowing AI trading agents to simultaneously monitor and participate in market opportunities across multiple blockchain networks.

Real-time on-chain monitoring and trend identification: The platform utilizes advanced AI models to conduct real-time monitoring of on-chain transactions, liquidity pools, and exchange data. This enables Olfaction to quickly identify market trends and unusual signals. For example, when a DeFi protocol presents yield opportunities or a certain MEME coin topic suddenly gains traction on social media, the AI model can instantly capture and alert potential opportunities. Community content and social media sentiment are also incorporated into the analysis, allowing for early positioning in highly emotional sectors such as MEME coins.

Cross-asset arbitrage execution: Thanks to its multi-chain architecture and high-frequency monitoring capabilities, Olfaction's AI smart agent can automatically identify and capture arbitrage paths across exchanges and assets. Gate News points out that Olfaction can "automatically capture and execute arbitrage paths," covering various trading scenarios including DeFi, MEME, and RWA. For example, when there is a price difference for a certain asset on different chains or different decentralized exchanges, the AI agent will automatically complete the arbitrage transaction with the help of smart contracts, enhancing profit consistency.

User and ecosystem support: The Olfaction platform democratizes AI strategies through collaboration and ecosystem integration. The integration with AVEAI means that 7 million users can start AI trading strategies with one click, without complex operations. At the same time, the collaboration with AI agent markets such as VitaminAI makes it possible for strategies to be published, rented, and commercialized. Analysis suggests that the Olfaction project, through these collaborations, will commercialize high-winning-rate AI trading strategies, allowing ordinary users to utilize AI for automated market making and arbitrage "like professional traders."

Safety and Automation: AI-generated strategies are executed through smart contracts, with the entire process from data analysis to trade matching being automated, reducing human delays. At the same time, Olfaction utilizes blockchain technology to ensure the security and transparency of the trading process, assisting in multi-layer risk control, such as tiered take-profit and stop-loss settings, thereby adapting to the risk management needs of the highly fluctuating market.

Future Trend Outlook and Response to Olfaction

Looking ahead, most analysts hold a cautiously optimistic view on the crypto market for the second half of 2025 and early next year. Institutions generally expect that with increasing "incoming funds" driving prices up, Bitcoin is likely to challenge historical highs or even more (VanEck predicts $180,000 by year-end, Standard Chartered's high-end forecast is $250,000); Ethereum is expected to benefit from ETF and enterprise-level demand, with significant price increases anticipated, with some experts estimating its year-end value could multiply several times. In emerging sectors, AI-themed coins, tokenization of real assets, decentralized infrastructure (DePIN), and Layer 2 scaling solutions are seen as potential directions for the next bull market. At the same time, caution should be exercised regarding the uncertainties brought by the macro environment and regulation—markets expect that policy risks and liquidity adjustments will continue to lead to significant fluctuations in the short term.

Olfaction Protocol has a natural advantage in such a market environment. Firstly, its AI agents can continuously learn about new market trends and macro signals, supporting dynamic risk hedging and position management. For example, when there are sudden changes in macro indicators or regulatory news, the system can quickly adjust trading strategies to smooth out the impact of fluctuations. Secondly, Olfaction's cross-chain capabilities allow it to discover and seize arbitrage opportunities across markets and assets, which is particularly important during future multi-asset resonance or sector rotation. Moreover, its intelligent trend capturing and social media analysis functions mean it can detect community hotspots earlier than human traders, thus gaining early returns during the initial surge of MEME-type assets or new projects. Finally, with the advancement of the "AI as a Service" ecosystem, Olfaction can connect to more terminals and platforms in the future, further expanding its user base and data sources, making AI-driven trading strategies accessible from professional institutions to ordinary investors. As the vision of Olfaction states, future trading will be "data-driven, strategy self-evolving, and instant execution." In this context, Olfaction Protocol is expected to provide refined and automated trading support for market participants through continuously iterating AI technologies, helping them navigate the volatility of the market steadily.