The crypto industry, currently valued at $2.36 trillion, is attracting entrepreneurs eager to experiment, especially with the emergence of Web3. Coinbase International has decided to step up as a foster for up-and-coming Web3 projects. The exchange, counted among the largest in the world, has announced the launch of its Pre-launch Market initiative. This will serve as a launchpad for upcoming crypto projects. Unlike venture firms that offer help through direct funding, Coinbase has chosen a way to help crypto startups while also bumping up the number of users on its International and Advanced platforms.
Like an Initial Coin Offering, but different
In an Initial Coin Offering (ICO), up and coming Web3 projects supply a bunch of its native crypto tokens for people to purchase as early adopters. This transaction brings funds to starving businesses and offer benefits as well as rewards to their holders.
Meanwhile, with Pre-launch Markets, Coinbase will allow users to trade perpetual futures contracts on the native tokens of eligible crypto projects for similar outcomes, the exchange said in an official post.
“Pre-launch markets significantly differ 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 applicable spot exchanges and the market meets our requirements for a standard perpetual future, Coinbase will begin converting the pre-launch market to a standard perpetual future,” the exchange explained.
Coinbase is not launching this feature for all of its customers. Only institutional and retail investors will be able to access this service through Coinbase International and Coinbase Advanced respectively. The exchange has explained that trading on Pre-launch Markets comes with more risks, 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 assigned to participants of our Liquidity Support Program (LSP). As such, these markets will be at higher risk,” its blog noted.
Rules governing Coinbase’s Pre-Launch Market initiative
The assets listed on Coinbase Pre-Launch Markets will be capped at an initial margin of 50 percent, or twice the leverage. The notional position limit has been capped at $50,000 (roughly Rs. 41.7 lakh) per token.
“It is crucial to exercise caution and refrain from trading contracts that you are unfamiliar with or do not fully understand the associated risks. Coinbase will enforce strict leverage, position limits, and open interest caps on these markets,” its blog added.
The company has also noted that there could be instances where some of these unlaunched tokens may never actually make it to real listings. Under this circumstance it said, “the pre-launch market would not be able to convert into a standard perpetual futures market, and the market may need to be suspended and/or delisted.”
Binance, Bybit, Bitget, and OKX are other exchanges that reportedly offer similar services for upcoming crypto projects.
