The crypto industry, currently valued at $2.36 trillion, is attracting entrepreneurs eager to experiment, especially with the advent of Web3. Coinbase International has decided to act as a promoter of upcoming Web3 projects. The stock exchange, which is one of the largest in the world, announced the launch of its Pre-launch Market initiative. This will serve as a foundation for the launch of upcoming crypto projects. Unlike entrepreneurial companies that offer help through direct funding, Coinbase has chosen a way to help crypto startups while also increasing the number of users on its international and advanced platforms.
Like an initial coin offering, but different
In initial coin offerings (ICOs), upcoming Web3 projects supply a bunch of their native crypto tokens for people to buy as early adopters. This transaction brings funds to struggling companies and offers benefits as well as rewards to their owners.
Meanwhile, with Pre-launch Markets, Coinbase will allow users to trade permanent futures contracts on native tokens of eligible crypto projects for similar results, the exchange said in an official announcement.
“Pre-launch markets are significantly different from standard perpetual futures markets. 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 is launched on the applicable spot exchanges and the market meets our requirements for standard perpetual futures, Coinbase will begin converting the pre-launch market to standard perpetual futures,” the exchange explained.
Coinbase does not roll out this feature for all of its users. Only institutional and retail investors will be able to access this service through Coinbase International and Coinbase Advanced respectively. The exchange explained that trading in pre-launch markets carries more risk as unlaunched tokens can be volatile.
“Given the high-risk nature of pre-launch markets, these markets are more prone to lower liquidity, higher volatility and increased liquidation risk. Positions for pre-launch markets will not be allocated to participants in our Liquidity Support Program (LSP). As such, these markets will be exposed to greater risk,” his blog notes.
Rules governing Coinbase’s pre-launch marketplace initiative
Assets listed on the Coinbase Pre-Launch Markets will be limited to an initial margin of 50 percent or twice the leverage. The notional position limit is limited to $50,000 (roughly Rs. 41.7 lakh) per token.
“The key is to exercise caution and refrain from trading contracts with which you are unfamiliar or do not fully understand the associated risks. Coinbase will apply strict leverage, position limits and open interest limits in these markets,” his blog added.
The company also noted that there could be cases where some of these unpublished tokens may never make it to the real list. In these circumstances, it said, “the pre-launch market could not be converted into a standard perpetual futures market, and the market may have to be suspended and/or delisted.”
Binance, Bybit, Bitget and OKX are other exchanges that reportedly offer similar services for upcoming crypto projects.
