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 rage, 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 only on-chain trading was available 24/7.

Binance launched WTI crude oil perpetual contracts on Saturday; the trading volume of crude oil contracts on the Gate platform surged by over 900% compared to the previous period.

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

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

The window is open, but who sets the price?

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 the scale of supply disruptions in the Gulf region could rise from 1.5 million barrels per day to nearly 6 million barrels per day within weeks, which is 17 times the peak reduction during Russia's 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 market trend are those crypto exchanges that positioned themselves in on-chain crude oil contracts early; the explosion in trading volume has directly driven their fee income to soar.

Gate data shows that Gate XBR (Brent crude) had a 24-hour contract trading volume of $12 million, a 951.37% increase; XTI (WTI crude) had a 24-hour contract trading volume of $21.15 million, a 397.08% increase, with funding attention and market participation continuing to rise.

On-chain monitoring data indicates that even before this market surge, several well-known on-chain traders and institutions had already positioned themselves in RWA US stocks 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 almost immediately established 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 oil traders, no one is seriously analyzing the actual blockade probability in the Strait of Hormuz, and no one is building oil supply-demand models.

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

This is precisely the essence of the current on-chain commodity market. Liquidity determines who sets the prices, and the liquidity of the on-chain market is still just a fraction of the traditional market. The Chicago Mercantile Exchange (CME) sees daily crude oil futures trading volumes in the tens of billions, while Hyperliquid's $910 million is already a historical peak.

A single position from a large trader can top the leaderboard; perhaps the price discovery has never truly occurred on-chain, and the so-called 24/7 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 oil supply and demand.

The money from oil has been made, 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 loss of 92,000 jobs, and the unemployment rate rose to 4.4%. The slowdown in employment should have pressured for interest rate cuts, but renewed inflation expectations have left the Federal Reserve paralyzed.

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 stand alone.

The risks do not stop there. Sovereign funds from Saudi Arabia, the UAE, and Qatar are pausing large investments in U.S. AI and data centers, while the U.S. plans 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 crazily injecting capital into data center projects over the past three years at high interest rates, allowing investors to redeem quarterly, but with loan terms lasting 5 to 10 years, the mismatch in terms has already sown hidden dangers.

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 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 it. The bill for macro risks has yet to come due, and the long-short battle has not reached its true settlement.

Next time, who will stand on the right side?