- Coinbase is set to introduce a groundbreaking feature, allowing users to trade crypto tokens prior to their official launch.
- The new initiative will be accessible to traders outside of the US, UK, and Canada, via Coinbase International Exchange and Coinbase Advanced.
- “This feature will enable participants to engage in price discovery,” Coinbase says, although it cautions about the higher risks involved in pre-launch trading.
Coinbase’s new feature allows users to trade crypto tokens before they are listed, providing a first-mover advantage but also posing higher risks.
Coinbase to Allow Pre-Launch Crypto Trading
Coinbase has announced an innovative feature enabling traders to buy and sell crypto tokens before they are officially listed on spot exchanges. This initiative will be available on Coinbase’s platforms for users in eligible regions outside the US, UK, and Canada. The feature aims to offer traders a chance to participate in what Coinbase describes as “price discovery,” prior to a token’s market launch.
How Pre-Launch Futures Will Work
Once a pre-launch perpetual futures contract’s underlying asset gets officially listed on an exchange, it will seamlessly convert into a standard perpetual contract. This allows traders to transition their positions without a hitch. Coinbase mentions that while this opens opportunities for early trading, it also brings heightened risks, including lower liquidity, higher volatility, and the increased likelihood of liquidation.
Retail and Institutional Participation
Coinbase Advanced, an advanced trading platform, will provide retail traders access to pre-launch markets. Meanwhile, the Coinbase International Exchange will cater to eligible institutional users. The new instruments are designed to accommodate both individual investors and larger entities, giving both groups an avenue to explore price movements ahead of mainstream listings.
Risk Factors and Institutional Safeguards
Pre-launch markets carry significant risks. Due to their inherently high-risk nature, they tend to exhibit lower liquidity and higher volatility, leading to a greater chance of liquidation. Additionally, these markets won’t have the support of Coinbase’s Liquidity Support Program (LSP), making them more susceptible to Auto-Deleveraging compared to standard perpetual futures contracts. To mitigate some of these risks, the funding rates for pre-launch perpetual futures will adhere to the same formula used for standard perpetual futures.
Conclusion
Coinbase’s introduction of pre-launch crypto trading marks a significant innovation, providing traders with early access to new tokens. However, the potential for high returns comes with notable risks, including lower liquidity and higher volatility. This feature will likely attract both retail and institutional traders looking to gain an edge in the market, but they must tread carefully, given the inherent risks involved.
