Coinbase is launching functionality on its international and advanced exchanges for users to trade futures on tokens that have not yet been launched.
this launch It will allow traders to participate in “pre-launch markets,” price discovery for upcoming projects, all within the Coinbase platform. Eligible traders can open long or short positions on an unlaunched token with up to 2x leverage, which can result in high returns.
Users will be able to buy and sell the token before its next launch, even if the token launch date has not been released yet. Institutional users must use Coinbase International Exchange to participate in these pre-launch markets, while eligible retail traders can access them through Coinbase Advanced.
Pre-launch markets
Pre-launch markets allow traders to trade perpetual futures contracts for tokens that have not yet been launched. Once a project or underlying token is launched on the relevant spot exchanges, these contracts move to standard perpetual futures contracts on Coinbase.
In futures trading, two parties agree to buy or sell a commodity, security, or asset at an agreed-upon price and date in the future. These contracts are legally binding and are traded electronically on exchanges – in this case, Coinbase.
Risks of trading options, especially in pre-launch markets
Users will exchange these futures for tokens that are not yet available. The risk of the underlying token never being released is beyond Coinbase's control. Furthermore, Coinbase may remove tokens after they are officially launched.
“Please note that pre-launch market positions will not be allocated to participants in our Liquidity Support Program (LSP). As such, these markets will be at greater risk of automatic downgrade compared to standard perpetual futures contracts.
If this happens, the pre-launch market may not be able to transition to the standard futures market and may need to be suspended or removed from the platform. Coinbase also reserves the right to temporarily or permanently suspend trading or remove markets from its platform at any time, leaving traders with the opportunity to… Lots of risks.
Essentially, traders can “stake” token projects that cannot be launched or accepted by Coinbase.
Due to the high-risk nature of pre-launch markets, these markets are more susceptible to decreased liquidity, increased volatility, and increased liquidation risk.
Coinbase parameters
Coinbase implemented Strict limits on leverage, positions, and open interest for these markets.
Pre-launch markets will have the following characteristics: an initial margin of 50% (max. leverage 2x) and a maximum position size of $50,000 for the virtual instrument.
According to Coinbase, “It is essential to exercise caution and refrain from trading contracts that you do not know or do not fully understand the risks associated with.”