Coinbase Adding Pre-Launch Markets
Coinbase is launching pre-launch markets, allowing users to trade tokens before their official release.
The Deets:
- Pre-Launch Trading: Users can trade perpetual futures contracts on not-yet-launched tokens.
- Index Price Mechanism: Uses a 4-hour EMA of the instrument's mark prices.
- Conversion Process: Converts to standard perpetual contracts upon token launch.
- Risks Involved: Higher volatility and liquidation risks.
The Bulk
Coinbase announced a new feature: pre-launch markets. This new offering allows users to trade perpetual futures contracts on tokens that haven't been officially launched yet. When these underlying tokens eventually debut on spot exchanges, the contracts will seamlessly transition into standard perpetual futures.
The pre-launch markets come with a unique index price mechanism, utilizing a 4-hour exponential moving average (EMA) of the instrument's mark prices. This method ensures a more stable pricing model during the high volatility periods typically associated with new token launches.
Coinbase will strictly enforce leverage, position limits, and open interest caps on these markets to mitigate risks. Pre-launch markets will initially have a 50% initial margin, equating to a maximum leverage of 2x, and a $50,000 notional instrument limit.
One of the significant advantages of pre-launch markets is the ability to participate in price discovery for upcoming projects within a trusted and secure platform. However, it is crucial for users to understand the elevated risks associated with these markets, including higher volatility, lower liquidity, and increased chances of liquidation.
The conversion process is another key aspect of pre-launch markets. Once the underlying token launches and meets Coinbase's requirements for a standard perpetual future, the pre-launch contract will convert linearly over a 4-hour period. During this time, the instrument will change from PRE_LAUNCH mode to PRE_LAUNCH_CONVERTING mode and finally to STANDARD mode upon completion.
🔜 What's Next?
The first pre-launch market, $EIGEN, will begin trading on June 18 at 8:00 a.m. ET
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