Coinbase is breaking new ground. The cryptocurrency exchange has unveiled a pre-launch markets feature, allowing select institutional and retail traders to wager on cryptocurrencies before they officially hit the market. Announced in a blog post on Monday, this innovation offers a chance to trade perpetual futures contracts on tokens yet to be listed on spot exchanges.
This new feature is part of the exchange’s international division. Institutional traders can access it via the Coinbase International Exchange, while retail traders can use Coinbase Advanced. However, this opportunity is restricted to users outside the U.S., Canada, and the UK.
The first pre-launch listing is set to go live on Monday, as revealed in a statement to local media. The exchange stated,
“Pre-launch markets on Coinbase allow users to participate in price discovery for upcoming projects on a trusted and secure platform.”
When the underlying token launches, the pre-launch futures contract will transition into a standard perpetual contract. However, these pre-launch markets function differently from regular perpetual futures. Notably, the exchange uses a 4-hour exponential moving average (EMA) of a token’s mark prices to set the “Pre-Launch Index Price.”
Coinbase’s Stringent Rules
This market won’t benefit from the exchange’s Liquidity Support Program (LSP). The exchange warned of the high-risk nature of pre-launch markets, which are more susceptible to lower liquidity, higher volatility, and increased liquidation risk. The exchange noted,
“These markets will be at higher risk of Auto-Deleveraging compared to standard perpetual futures.”
In an effort to maintain order, Coinbase has imposed stricter trading conditions on pre-launch markets. Unlike regular perpetual futures offering 10x leverage, pre-launch markets are capped at 2x leverage. Additionally, the position limit size is set at a notional value of $50,000.
Coinbase’s latest move highlights the exchange’s commitment to innovation while emphasizing caution. By offering a controlled environment for speculating on upcoming cryptocurrencies, Coinbase aims to balance opportunity with risk management, providing a new avenue for traders to engage with the ever-evolving digital asset landscape.
