Coinbase has introduced a new feature on its international and advanced exchanges that allows users to trade futures contracts on tokens that have not yet been launched. This feature, known as pre-launch markets, enables traders to participate in the price discovery of upcoming projects directly on the Coinbase platform. Traders can take long or short positions on an unlaunched token with up to 2x leverage, potentially leading to significant returns.
One of the key benefits of pre-launch markets is that users can buy and sell a token before its official launch date, even if the launch date has not been announced. Institutional users will need to use Coinbase International Exchange to access these markets, while eligible retail traders can utilize Coinbase Advanced.
In pre-launch markets, traders can trade perpetual futures contracts for tokens that have not yet been launched. Once the underlying token is officially launched on relevant spot exchanges, these contracts will transition into standard perpetual futures contracts on Coinbase. However, it is important to note that pre-launch markets come with unique considerations and heightened risks, so traders should exercise caution and fully understand the risks involved before trading these contracts.
One of the main risks associated with options trading in pre-launch markets is the possibility that the underlying token may never be launched. Additionally, Coinbase reserves the right to remove tokens from the platform even after they have been officially launched. Traders should be aware that positions in pre-launch markets will not be assigned to participants of the Liquidity Support Program, making these markets more susceptible to Auto-Deleveraging compared to standard perpetual futures markets.
Due to the high-risk nature of pre-launch markets, they are more likely to experience lower liquidity, higher volatility, and increased liquidation risk. To mitigate these risks, Coinbase has set strict limits on leverage, positions, and open interest for these markets. For example, pre-launch markets will have an initial margin of 50% with a maximum leverage of 2x and a position limit size of $50,000 notional instrument limit.
In conclusion, while pre-launch markets offer the opportunity for traders to speculate on upcoming token projects, they also come with significant risks that traders must carefully consider. It is essential to exercise caution, refrain from trading contracts that are not fully understood, and be aware of the potential implications of participating in pre-launch markets on the Coinbase platform.