Coinbase is now letting some institutional and retail traders take bets on cryptocurrencies that have yet to launch.
The exchange's international division has added a pre-launch markets feature that allows some users to trade perpetual futures contracts on tokens that are not on spot exchanges, according to a post on its website published Monday. This lets traders speculate on the future value of upcoming tokens before they go live. The first pre-launch listing is due to go live Monday, Coinbase said in a statement to The Block.
Those institutional users deemed eligible for the new market can access it through Coinbase International Exchange, while eligible retail traders can use Coinbase Advanced. It is only available outside of the U.S., Canada, and the UK.
"Pre-launch markets on Coinbase allow users to participate in price discovery for upcoming projects on a trusted and secure platform," the company said in an informational blog post.
Once the underlying token is launched, the pre-launch futures contract will convert into a standard perpetual contract.
Not like regular perpetual futures
Pre-launch markets operate differently than standard perpetual futures, Coinbase noted. For example, this market uses a 4-hour exponential moving average (EMA) of a token's mark prices to determine the "Pre-Launch Index Price."
As it won't be part of Coinbase’s Liquidity Support Program (LSP), the exchange warned that "given the high-risk nature of pre-launch markets, these markets are more prone to lower liquidity, higher volatility and increased liquidation risk... As such, these markets will be at higher risk of Auto-Deleveraging compared to standard perpetual futures."
Coinbase appears to want to rein in cowboys; whereas regular perpetual futures on Coinbase offer 10x leverage, pre-launch markets have the more muted 2x leverage maximum and a position limit size of just $50,000 notional.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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