April 22, 2024|Commentary

What We See in the Markets: Oil, Crypto and the Bitcoin Halving


Macro remains focused on Israel and Iran, but there is a sense—at least in markets—that the initial shock is wearing off. Crude futures are back to around $81, down from the elevated $87 level where they traded last week; this level indicates that while the conflict is not over, it doesn’t have as much risk of spilling into outright chaos. Nobody on any side of the conflict wants the flow of oil to be disrupted, and so it probably won’t be, unless things slip into a faster market.

For the most part, crypto markets have calmed down, with volatility still on the high side but mostly waiting for the next directional cue. There remains high correlation within crypto, which is expected during a period of macro focus. Token2049 took place in Dubai last week, but a combination of geopolitical tension redirecting flights and a once-in-a-century storm leading to flooding (ask me, or anyone who was in town, for our travel horror stories; everyone has one) put a dampener on the event’s ability to generate idiosyncratic headlines. NEAR has been the best performer, up 20%, in the L1/2 sector over the past week; I caught an excellent panel, barely attended as it was the last one of the Friday session, by Near’s founder, Ilia Polosukhin, on how Near evolved out of a need to decentralize the inputs going into AI systems.

The Bitcoin Halving has come and gone, an event which always brings focus to one of Bitcoin’s key questions: where does Bitcoin’s security budget come from once block rewards drop to near zero? It’s a fair question that won’t matter until the future, which means it very much matters now. The best argument has always been that Bitcoin transactions would generate enough fees, over the long term, to support a decentralized mining industry, though for most of Bitcoin’s life, fees have been negligible. Since Taproot, we have seen the emergence of Ordinals on Bitcoin, which has brought about a fairly primitive NFT market onchain. The Halving has brought about Runes, which hints at what the Bitcoin DeFi market might look like going forward. One theme in Dubai was an abundance (OK… an overabundance) of Bitcoin L2s. The first block post-halving yielded a fee of over 35 BTC (congratulations to ViaBTC; satoshis from this block actually trade at a premium!) and they have dropped to around 8 BTC per block on average, still significantly higher than pre-Runes. The idea that fees will remain high long-term is somewhat at odds with the idea that L2s will emerge and be meaningful; to be fair, however, this is a question which the Ethereum markets have not answered either.

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