Bitcoin Runes, a new protocol for issuing fungible tokens on the Bitcoin network, is set to go live with the Bitcoin halving later this week.

Yet, the real market opportunity for Runes may only come months after the first wave of investor hype subsides, according to pseudonymous decentralized finance (DeFi) researcher, Ignas, who wrote in an April 17 X post:

“Runestone, RSIC, and PUPS are already pumping, promising holders shiny new Rune token airdrops. And FOMO threads keep coming. But, like the NFT frenzy post-JPEG reveal, the market could soon cool off.”

Rune floor prices could see a significant drop, mainly because they don’t immediately improve the trading experience of BRC-20 tokens, and because small traders may be priced out of the increasing Bitcoin transaction fees, according to the pseudonymous researcher.

Runes and BRC-20 tokens are both new fungible token standards aiming to create more utility for Bitcoin, in a new paradigm known as Bitcoin decentralized finance (DeFi), or BTCFi for short.

Asset management giant Franklin Templeton also recognized the emergence of Runes. The asset manager also noted the success of other Bitcoin-native fungible token standards, like Ordinals, in an April 3 research report:

“Bitcoin Ordinals have seen a surge in trading volume over the past several months. This is reflected in an increase in dominance starting in December of 2023 when it surpassed ETH in trading volume.”

Bitcoin surpassed 65 million Ordinals inscriptions on April 11, less than one year and three months since the launch in January 2023.

DeFi researcher Ignas expects hundreds of Runes to launch on the market, which will dilute trader attention and inflows into particular tokens.

Paired with the lack of initial utility around Runes, these aspects will make them akin to memecoin trading, according to the pseudonymous researcher, who wrote:

“Finally, utility-wise runes will trade as memecoins like BRC20s. At least at first, so the excitement of ‘new' will fade away. Especially if no rune token manages to sustain the pump and degens lose money.”

Despite the bearish short-term outlook, Ignas noted that he is bullish on Runes in the long term:

“If I'm right the real opportunity comes after the hype cools down post the Rune protocol launch.”

Related: BTCFi is an ‘enormous opportunity’ to make Bitcoin a productive asset — Stacks

Bitcoin Runes will drive more activity to BTC layer-2s

Runes could be a net positive for the development of Bitcoin layer-2 (L2) networks. Along with Ordinal inscriptions, they could drive more activity to Bitcoin L2 networks, as increasing Bitcoin network fees will price out smaller transactions, according to Andre Serrano, product and partnership manager at Stacks, who told Cointelegraph:

“There’s going to be a lot of asset issuance on [Bitcoin] L1, which will drive up the transaction fees… This prices out a lot of users and activity… Ultimately, pushing more of this activity to L2s will become a necessity.”

Bitcoin L2 network Stacks is also preparing to launch a trading solution for Runes, BRC-20s, and Ordinals inscriptions.

Related: Bitcoin supply to run out on exchanges in 9 months — Bybit