Pre-market Trading in Crypto: Opportunities and Risks
1. What is Pre-market Trading?
In the crypto market, pre-market trading (also known as pre-launch) refers to the practice where exchanges allow users to trade tokens before they are officially launched or listed on major exchanges.
2. Forms of Pre-market Trading
Pre-market Perpetual: Trading perpetual futures contracts of tokens that have not yet been launched. Users can open long or short positions based on the anticipated price of the token.
Pre-market Trading (OTC): Direct trading between buyers and sellers through OTC platforms, often requiring sellers to collateralize assets to ensure the transaction.
3. How Pre-market Perpetual Works
Pre-market perpetual is a derivative product that allows users to trade tokens before their launch through perpetual futures contracts. Key components include:
Index Price: The average price of the asset on major exchanges, used as a standard price for the futures contract.
Funding Rate: The fee exchanged between long and short positions, based on the price difference between the spot and futures markets.
Mark Price: The fair price of the contract, typically calculated based on actual bid/ask volumes on the exchange.
Since the tokens have not officially launched, information about them is often limited. Some exchanges may assume the total supply and FDV valuation based on the project, adjusting these figures upon the token's official release.
4. Benefits of Pre-market Trading
High profit potential: Purchasing tokens at a low price before launch can yield significant profits upon listing.
Early valuation: Helps investors assess the token's value before its official release.
Early project involvement: Opportunity to become an early investor in promising projects.
5. Risks of Pre-market Trading
Lack of information: Limited details about the token and project can lead to uninformed investment decisions.
High price volatility: Token prices may fluctuate significantly after launch, posing risks to investors.
Counterparty risk: In OTC trading, if the seller fails to deliver the promised tokens, the buyer may incur losses.
6. Popular Pre-market Platforms
Aevo: A decentralized exchange supporting perpetual futures trading for tokens before their launch.
Hyperliquid: A decentralized derivatives exchange supporting various token trades.
Whales Market: An OTC platform allowing users to trade pre-launch tokens with asset collateral mechanisms.
Bybit Pre-market: Bybit's pre-market feature enabling users to trade tokens before official listing.
Kucoin Pre-market: Kucoin's pre-market feature supporting token trading prior to launch.