Phemex CEO: The Barbell Phenomenon in the Crypto Market, Why AI Will Not Fully Replace Traders, and a Bullish Outlook for Q4

Federico Variola appeared on the Chain Reaction podcast hosted by Ciaran Lyons, discussing the current state where individual investor behavior is split into two distinct speeds, and how the proper use of AI could enhance rather than replace traders' judgment.

Polarized Market

Federico described the current market as a barbell (a state with weights on both ends). On one end, there is high-volatility meme coin trading driven by fast-moving younger users, while on the other end, there are some quality altcoins like HYPE that are developing real businesses and attracting mature capital. A significant factor contributing to this change is social trading. The algorithm-driven content discovery features on TikTok, Instagram, and YouTube evaluate content regardless of follower count, allowing small creators to spread their views on specific tokens similarly to accounts with millions of followers, marking a significant shift from a few years ago.

When asked whether following others' actions actually improves the skills of the average trader, Federico candidly replied that the skills of the average trader have declined. This does not mean that opportunities have disappeared; volatility still exists and creates winners, but he believes that a market falling into pure meme coin speculation is detrimental to the industry. His personal preference still leans towards tokens with solid documentation and strong fundamentals.

AI as a Multiplier, Not a Replacement

Regarding the expanding role of AI in trading, Federico highlighted an important distinction to consider. The crypto market is now more closely connected to a broader world than ever before. Interest rate decisions, advancements in AI, and energy prices are moving the market in ways that once felt separate. The true value of AI assistants lies not in making decisions on behalf of traders but in connecting these points and rapidly processing cross-disciplinary information in a fast-changing environment. "The final decision always rests with the user," he stated. Agents will not replace traders, and humans will remain in the process.

He sees DeFi as the area where this is advancing most rapidly, where AI agents are well-suited for building diverse positions. Tasks like government bonds, yield strategies, and rational allocation between assets are relatively limited tasks that agents can handle effectively. Complete automation of active trading remains a more challenging task. He pointed out that aside from becoming a liquidity provider, there are still no passive strategies that can function reliably without human oversight. If done correctly, such technological advancements can help narrow rather than widen the information gap.

Meme Coins: A Smaller Revival Than It Appears

Regarding the resurgence of meme coin activity, Federico disagreed with the notion that it represents a major revival. Meme coins previously reached valuations in the billions of dollars, but now even those supported by platforms like Robinhood are valued at around $250 million at most, which is just a fraction of the scale that the category once boasted. Currently, the revival remains limited in scope. What meme coins still excel at is generating trading volume and volatility, and capital always chases that. "There will always be things that rise from zero," he noted, stating that this alone is sufficient to sustain the meme coin cycle.

He also pointed out that meme coins have not necessarily displaced DeFi but have merely absorbed the volatility that used to exist in mid-cap altcoins and infrastructure tokens. Many of these have struggled throughout this cycle. Regarding whether additional utility can meaningfully enhance meme coins, Federico's view was cautious. Adding utility to fundamentally unnecessary projects could lead to more harm than good. This could result in projects making promises that were never needed in the first place just to chase retail hype, and if those promises are not kept, it could damage the token. His conclusion is that projects should not make excessive promises merely to attract retail attention.

The Self-Custody Issue in DeFi

Looking ahead to 2030, Federico sees actual progress in DeFi. Large platforms are increasingly cooperating rather than avoiding regulators. The weakness still lies in self-custody. As digital threats become more sophisticated, the risk calculations for individual users become harder to justify. Permissionless access is valuable, but taking the risk of losing an entire balance for relatively small upside is a challenge that DeFi still needs to harmonize.

Regarding whether DeFi can exert pressure on traditional banking, he framed it as a simple trade-off. If DeFi borrowing becomes cheap enough to be meaningful, adoption may progress, but as long as the risk profile remains high, most users will continue to prefer traditional rails.

The Quantum Computing Issue for Bitcoin and a Bullish Outlook for Q4

Specifically regarding Bitcoin, Federico pointed out a broader narrative. As AI reshapes the way value is created, hard assets like gold and Bitcoin may attract renewed interest from individual investors seeking tangible assets. However, he noted realistic risks to such a thesis. Quantum computing and its long-term implications could expose dormant wallets on-chain to danger. This risk has been partially priced into the recent BTC adjustment phase, shaking institutional investor confidence. This is part of the reason some investors are exploring more actively managed alternatives like Zcash, which he sees as both a strength and a weakness of Bitcoin's simpler, static design.

Federico expects continued volatility in the short term but is optimistic heading into Q4, pointing out Bitcoin's historical tendency to perform well in December and suggesting it has room to recover previous highs and exceed them by early 2027.

Full episode available here: https://x.com/Cointelegraph/status/2099846980218548608