Trading Never Sleeps: On-Chain, Crude Oil, and Leverage

Author: Zhou, ChainCatcher

During the weekend of March 7 to 8, the fires of war in the Middle East continued to burn, and the situation in the Strait of Hormuz worsened, with oil-producing countries announcing production cuts one after another.

However, the global crude oil futures market was closed, and on-chain 24-hour trading became highly sought after.

Binance launched WTI crude oil perpetual contracts on Saturday; the trading volume of crude oil contracts on the Gate platform surged over 900% month-on-month.

On Monday, as traditional futures markets opened, WTI saw a single-day surge of over 30%. The trading volume of WTI crude oil contracts on Hyperliquid jumped from over $100 million on March 3 to nearly $1 billion by March 9.

Everyone is saying this is a highlight moment for on-chain commodities, yet no one is asking who determines the prices in this window.

The window is open, who sets the prices?

According to Bloomberg, the cryptocurrency market has become the only public window for traders to gauge the ongoing conflict risk in the Middle East.

As the war in Iran continues, on-chain platforms tracking contracts for crude oil, gold, and silver have seen significant volatility driven by retail and crypto-native traders.

The volatility of on-chain prices can serve as a real-time indicator of market sentiment, but its reference value is limited. Crypto observers indicate that these platforms also provide a reference model for what "around-the-clock trading" might look like in traditional markets.

This time, reality is more extreme than the narrative.

Goldman Sachs' monitoring data shows that oil flow through the Strait of Hormuz has plummeted by about 90%, with an average daily supply of 18 million barrels vanishing into thin air.

JPMorgan estimates that supply disruptions in the Gulf region could rise from 1.5 million barrels per day to nearly 6 million barrels per day within weeks, 17 times the peak reduction during Russia's production cuts in 2022.

Kuwait, the UAE, Iraq, and Qatar have all announced production cuts or shutdowns. Since March, WTI has seen a cumulative increase of over 50%.

The real beneficiaries of this wave are those crypto exchanges that positioned themselves in on-chain crude oil contracts early, with the explosion in trading volume directly driving a surge in their fee income.

Gate data shows that the 24-hour trading volume for Gate XBR (Brent crude) reached $12 million, a month-on-month increase of 951.37%; XTI (WTI crude) saw a 24-hour trading volume of $21.15 million, a month-on-month increase of 397.08%, with increasing capital attention and market participation.

On-chain monitoring data indicates that even before this wave of market activity, several well-known on-chain traders and institutions had already positioned themselves in the RWA US stock and commodity sectors.

• Sky co-founder Rune (@RuneKek) established a long position in crude oil worth $8.7 million at an average price of $92 on March 7, simultaneously hedging with short positions in ETH and the Nasdaq.
• CBB (@Cbb0fe) opened a short position in CL worth $36.3 million at an average price of $78.3 on March 4, while also shorting the South Korean stock market, natural gas, and the AI industry chain, with a long position of $4.76 million in gold.
• Loracle opened a short position in CL worth $7.8 million at an average price of $92 on March 7, and also shorted NVDA and PAXG with a position of $5.6 million, currently facing losses on both sides.
• After the $7.7 million short position of the whale 0x8af was fully liquidated, it quickly reestablished a new short position.
• An address that previously made over $50 million in profits from shorting altcoins has incurred losses of $7.3 million in commodities over the past month.

Among these individuals, some are engaging in structured hedging, some are betting on reversals, and some are adding to trends.

Their directions vary, but one thing is the same—none of them are true crude oil traders, no one is seriously analyzing the actual blockade probability in the Strait of Hormuz, and no one is building crude oil supply and demand models.

What drives them to enter the market is the narrative of war and the amplifiers provided by on-chain leverage.

This is the essence of the current on-chain commodity market. Liquidity determines who sets the prices, and the liquidity in on-chain markets is still just a fraction of traditional markets. The Chicago Mercantile Exchange (CME) sees daily crude oil futures trading volumes in the tens of billions, while Hyperliquid's nearly $1 billion is already a historical peak.

A single position from a large trader can top the holdings chart; perhaps the price discovery has never truly occurred on-chain, and the so-called 24/7 trading is merely a collective imagination of crypto traders regarding war.

In this window, prices are set by emotions, amplified by leverage, and driven by the narrative of war—rather than by crude oil supply and demand.

The money has been made in crude oil, but greater macro risks are accumulating

Those still speculating in on-chain crude oil contracts may not realize that the same war is accumulating risks from another direction.

According to models from The Kobeissi Letter, if oil prices remain around $120 for more than three months, the U.S. CPI inflation rate will rise to about 3.7%, reaching its highest level since September 2023.

Meanwhile, February's non-farm payrolls showed a decrease of 92,000 jobs, and the unemployment rate rose to 4.4%. The slowdown in employment should have forced a rate cut, but renewed inflation expectations have left the Federal Reserve unable to act.

Once the window for rate cuts closes, the valuation logic of global risk assets will come under renewed pressure. The stock market, commodities, and cryptocurrencies will not be able to remain unaffected.

The risks do not stop there. Sovereign funds from the Middle East, such as those in Saudi Arabia, the UAE, and Qatar, are pausing large investments in U.S. AI and data centers, while the U.S. is simultaneously planning to extend AI chip export controls globally.

Additionally, BlackRock has announced restrictions on investor redemptions from its $26 billion corporate loan fund—these funds have been aggressively funding data center projects at high interest rates over the past three years, allowing investors to redeem quarterly, but with loan terms lasting 5 to 10 years, the mismatch in duration has created hidden risks.

The funding sources for the crypto market and the AI narrative are highly overlapping; once the AI narrative cools and triggers a wave of fund redemptions, it will lead to more sell-offs, a scenario that was seen before the 2008 subprime mortgage crisis.

Conclusion

A war has turned a group of dog coin speculators into crude oil traders; some of them have made money, while others have been liquidated and reopened positions.

On-chain trading never sleeps, and the war will not stop because of this. The bill for macro risks has yet to come due, and the battle between bulls and bears has not reached a true settlement.

Next time, who will stand on the right side?