Yup. Smart contracts aren't even contracts, and they certainly aren't smart.

An algorithm is, by its nature, dumb. It does the thing it's programmed to do, without any hesitation. It doesn't stop to consider the situation or ask relevant questions. This is a terrible idea for a system that facilitates trades, because all someone has to do, to use the example you cited, is wash trade a newly minted token back and forth a few times to set a price, and then find a smart contract that's happy to spew out some amount of a token you want, at the price you just set, like a busted slot machine.