Users will be able to trade futures of soon-to-be-listed tokens and coins on the exchange.

Coinbase International is stepping into the realm of launchpads for nascent crypto projects, aligning itself with other centralized exchanges such as Binance, Bybit, Bitget, and OKX. This new feature, introduced on June 17, will enable users to trade perpetual futures contracts on tokens before their official launch. The concept behind pre-launch markets is to provide a trading platform for tokens that are yet to be listed on spot exchanges.

Key Features of Coinbase International’s Pre-Launch Markets

1. Pre-Launch Trading: Users can trade perpetual futures contracts on tokens that haven't been officially launched. Once these tokens are listed on spot exchanges, the futures contracts automatically convert into standard perpetual contracts.

2. Availability: The pre-launch market feature will be accessible to institutional investors through Coinbase International and to retail traders via Coinbase Advanced.

3. Leverage and Position Limits: Initial margin is capped at 50%, translating to a 2x leverage. Additionally, there is a notional position limit set at $50,000 per token to manage risk.

4. Index Price Mechanism: Unlike traditional perpetual futures, the pre-launch markets use a 4-hour exponential moving average (EMA) of the instrument’s mark prices for the Pre-Launch Index Price, differentiating it from the standard perpetual futures contracts.

5. Risk Considerations: Coinbase has highlighted the inherent risks in pre-launch markets, such as lower liquidity, higher volatility, and increased liquidation risk. These instruments are not covered by the exchange’s Liquidity Support Program, further elevating the risk of auto-liquidation.

6. Token Launch Uncertainty: There is a potential risk that the underlying token may never launch, which is beyond Coinbase’s control. If a token does not make it to the full listing process, the pre-launch market for that token might need to be suspended or delisted.

Background and Regulatory Compliance

Coinbase International, launched in May 2023, operates as the overseas arm of Coinbase, the well-known U.S.-based cryptocurrency exchange. It is licensed under the Class F framework by the Bermuda Monetary Authority, ensuring compliance with regulatory standards.

Implications for the Crypto Market

Coinbase International’s foray into pre-launch markets marks a significant development in the crypto space, offering traders a new avenue to engage with upcoming projects. This move can potentially provide early liquidity and price discovery for nascent tokens, fostering innovation and investment in the crypto ecosystem. However, it also emphasizes the need for traders to exercise caution given the heightened risks associated with pre-launch assets.