Daryl doesn't have a knife. Daryl would have used it by now, if he did. Just as a threat-- he really doesn't want to kill this man, whose only crime, as far as he can tell, is being an idiot-- just to keep his head above water. He's never much liked the idea of trick weapons. You don't pussyfoot around with bodily harm.

Once it's obvious they're both waiting for the other to strike first, though, that means... something. It means this stupid thing doesn't have to go any further. Daryl has landed a hit-- his feelings are, if not calmed, at least assuaged. He stands up straight, and even puts his hands up. He won't attack unless Byerly does.

"Where'd you learn to fight?" He's a nasty fighter, a painfully good one. Not relying on strength, using counter-balance and all that shit, it's clever. As much as Daryl dislikes this man-- and he does, a great deal-- he could be of use.