Rune Protocol Goes Live: Has a New Development Phase for Bitcoin Arrived?

On April 20, Bitcoin completed its fourth halving at block height 840,000 while introducing the long-awaited Runes protocol. This protocol, proposed by Casey Rodarmor—the founder of the Bitcoin Ordinals protocol—utilizes the blockchain's UTXO transaction model to facilitate the issuance of fungible cryptocurrencies in an efficient and user-friendly manner. Additionally, the OKX Web3 wallet timely launched its self-developed Runes marketplace, providing users with a one-stop rune ecosystem experience, thereby enhancing the overall ecosystem's activity and user convenience.

Unlike previous markets, the current "Runes" hot projects mainly appear in the form of Bitcoin NFTs, characterized by fairness without pre-mining or pre-allocation. These small images of rune concepts, though simple, have attracted significant attention, especially as the issuance of Runestone approaches and the launch date of the Runes protocol mainnet nears, leading to a continued increase in market enthusiasm. The technical details and market dynamics behind this are crucial for investors, especially when assessing the risks associated with the official interpretation rights of the Ordinals protocol. The following article will further explore the impact of the Runes protocol and investment opportunities.

Economic Trends and the Crypto Market's Response: A Detailed Analysis of the Market Impact of the Runes Protocol

Economic Indicators and Cryptocurrency Market Reactions

The U.S. retail sales data for March showed strong performance, exceeding market expectations, but the hawkish remarks from Federal Reserve Chairman Powell suppressed market expectations for future rate cuts. Currently, the market expects the Fed to possibly cut rates only one to two times this year, each by 25 basis points, a significant reduction from the six rate cuts anticipated at the beginning of the year. Additionally, tensions in the Middle East have eased somewhat, but this has not prevented the dollar index from reaching a six-month high, while U.S. stocks have seen a sharp decline due to adjustments in liquidity expectations.
In the cryptocurrency market, although Bitcoin's overall performance has been weak, its market dominance has unexpectedly increased, reaching a four-year high. This rise in dominance is primarily due to the market's heightened attention to the Runes protocol, which is set to officially launch during this weekend's BTC halving event, attracting significant interest from U.S. funds.

Exchange Dynamics and Market Performance

At the exchange level, Binance and OKEx have respectively launched new tokens such as TAO and MERLIN, with the TAO token relying on an AI and machine learning-based POW architecture, while MERLIN serves as an EVM Layer 2 solution for BTC, boasting strong technical support and market potential. The OMNI token focuses on cross-chain information transmission between Ethereum Layer 2s, addressing L2 fragmentation issues, with its market value comparable to ZETA, both exceeding $2.5 billion.

Technical Indicators and On-Chain Analysis

From a technical and market indicator perspective, Bitcoin's price cycle pattern shows that the previous two bull markets lasted 3.5 years, with price increases of 113 times and 19 times, respectively. The current cycle has only seen a price increase of 4 times so far, indicating a slowdown in acceleration. Furthermore, the active spot ETF market has brought in new capital inflows, estimated at around $12 billion, with the BTC held by ETFs valued at $60 billion, becoming a key driving force in the market.
The market capitalization of stablecoins has increased by 2%, reflecting that the fundamentals of long-term capital remain healthy. The MVRV-ZScore indicator currently stands at 2.1, within a neutral range, indicating that the overall profit status of the market is good, but it has not yet reached extreme market top or bottom ranges.

Futures and Spot Market Details

In the futures market, the funding rate approached 0 this week, indicating a bullish advantage, suggesting that the short-term market may be nearing a peak. The futures open interest for BTC has significantly decreased, indicating that major funds are partially withdrawing. The long-short ratio for futures stands at 2.4, showing that market sentiment leans towards greed.
In the spot market, the continuous decline in BTC prices and the realization of the halving event have caused the minimum shutdown price for miners to rise to $49,000. Bitcoin has dropped 15% from its peak, while major altcoins have seen declines of nearly 50%, reflecting the selling pressure from ongoing ETF buying and the unlocking of altcoins. A comprehensive improvement in market liquidity is expected to arrive by the end of the year with the Fed's rate cuts, at which point the entire crypto market may experience a rally.
The improvements in macroeconomic conditions, optimization of technical indicators, and adjustments in the futures and spot markets provide a favorable market environment for the launch of the Runes protocol, signaling that it may trigger a new round of technological revolution and capital flow in the crypto market. For investors, keeping an eye on the latest changes in these economic indicators and market dynamics is key to seizing future investment opportunities and risks.

Runes Protocol: Revolutionary Asset Management and Issuance Strategy for the Bitcoin Network

The Runes protocol, designed by Casey Rodarmor, the founder of the Ordinals protocol, introduces a new type of Bitcoin network asset—runes. This protocol aims to address the inefficiencies and operational complexities caused by the inscriptions relied upon by the BRC-20 protocol, providing a more streamlined and efficient framework for asset issuance and management.

Compatibility and Scalability of the Protocol

The Runes protocol boasts excellent compatibility and scalability, allowing seamless integration with Bitcoin's UTXO model and layer two protocols based on it (such as the Lightning Network and CKB). Compared to other fungible token protocols like BRC-20, Runes significantly enhances operational efficiency and user experience through a simplified transaction process and direct management of token balances tied to UTXO.

Optimizing User Experience

Runes supports Simple Payment Verification (SPV) wallets, offering users a lightweight transaction experience that surpasses traditional BRC-20 protocols. It also emphasizes compatibility with existing Bitcoin scripts and address types, providing developers with a more user-friendly and accessible development environment.

Flexibility in Token Issuance

In terms of token issuance, Runes offers tremendous flexibility. It allows token names to range from 1 to 28 characters and employs various innovative issuance mechanisms, such as fixed total supply issuance and public inscription issuance, along with more expressive issuance methods. These mechanisms not only enrich the token design space within the Bitcoin ecosystem but also enhance its security, effectively avoiding common security risks.

Improvements in UTXO Management

Runes optimizes UTXO management by utilizing OP_RETURN scripts, avoiding the complexities and security risks that may arise from the witness portion of transactions, and reducing unnecessary UTXO generation. This approach not only enhances the overall health and efficiency of the network but also integrates seamlessly with Bitcoin's infrastructure, encouraging more optimized UTXO usage.

Implementation of the Protocol and Community Support

As Bitcoin approaches its next halving, the Runes protocol is expected to officially launch at the significant block height of 840,000. The anticipated launch time is in late April 2024, marking the formal entry of the Runes protocol into the Bitcoin ecosystem, opening a new chapter for the issuance and management of fungible tokens on the Bitcoin network. Additionally, the protocol, like Merlin, is expected to provide comprehensive technical support for Runestone and Runes. This extensive community support not only reflects the Bitcoin community's recognition of the potential of the Runes protocol but also showcases the cryptocurrency community's shared pursuit of innovation and progress.
The launch of the Runes protocol signifies an important technological innovation within the Bitcoin ecosystem, opening new possibilities for the diversified development and technological innovation of the Bitcoin network through the simplification of the UTXO model and efficient token transfer mechanisms.

Activation of the Runes Protocol: A Glimpse into Emerging Market Opportunities

Since Bitcoin's halving and the successful launch of the Runes protocol, the activity level in the crypto community has significantly increased, with a celebratory atmosphere akin to a festival surrounding the new protocol. Currently, over 4,700 rune projects have been initiated, and miner fees have noticeably decreased since the initial launch, providing more favorable entry conditions for investors and participants.

Upon detailed exploration of these rune projects, it is found that they can be categorized into the following types, each with investment value:

1. Initial rune projects: Such as UNCOMMON•GOODS and other runes numbered 0-9, due to their uniqueness and open participation, it is recommended to engage when gas fees are low to obtain the best narrative value.
2. High-heat projects: Such as DECENTRALIZED and DOG•GO•TO•THE•MOON, these projects typically airdrop to early supporters first, then drive prices up with market enthusiasm.
3. Technology and community-driven projects: THE•RUNIX•TOKEN and SATOSHI•NAKAMOTO showcase a model of project development driven by technological innovation or community activities, with SATOSHI•NAKAMOTO drawing significant attention due to its remarkable market performance and widespread holding addresses.
   Additionally, interesting MEME-type runes like COOK•THE•MEMPOOL and WANKO•MANKO•RUNES have also attracted considerable attention, often possessing unique cultural value and limited-time minting mechanisms, leading to high price volatility and investment returns.
   Community-type runes, such as PUPS•WORLD•PEACE and MAGIC•INTERNET•MONEY, rely on strong community support and rich social media activities to continuously attract new participants.
   When investing in these rune projects, considering the novelty of the Runes protocol and the uncertainty of the market, it is advisable for investors to thoroughly understand each project's issuance mechanisms, community vitality, and technical support. While the design of Runes offers higher efficiency and better user experience, there may still be some technical and cognitive barriers in the early stages of the market.
   In summary, the launch of the Runes protocol not only brings new vitality to the Bitcoin network but also opens new avenues for the diversification of crypto assets and technological innovation. As these rune projects gradually unfold, the market will place greater emphasis on technical practicality and community participation, likely leading to a new wave of cryptocurrency innovation. In this context, are you ready to explore and invest in these promising rune projects?