The concept of "pre-market" has recently gained attention in the cryptocurrency industry. But what exactly does it entail? In this article, we try to provide a detailed look into pre-market trading and its significance in the crypto world.
In the context of cryptocurrencies, pre-market trading, sometimes referred to as pre-launch trading, involves the buying and selling of coins or tokens that have not yet been officially listed on major exchanges.
What is Pre-market Trading?
Unlike traditional markets that have designated pre-market hours, the 24/7 nature of the cryptocurrency market eliminates this distinction. Instead, the term "pre-market" in crypto refers to projects that are confirmed to have tokens, which can be traded before they are officially launched. This trading can take place months in advance of the official launch.There are two primary forms of pre-market trading:
- Pre-market Perpetual
- Pre-market Trading (OTC)
How Pre-market Trading Functions in the Crypto Market
Pre-market Perpetual
Pre-launch perpetual is a derivative product, specifically a type of perpetual futures contract, for tokens that haven't been launched yet.Like other futures contracts, these do not grant ownership of the underlying asset. Instead, they offer long or short positions based on the anticipated price of the token.
Key elements of pre-launch perpetual contracts include:
To engage in this market, investors can either create or agree to buy/sell orders with pre-set prices and quantities of tokens. There are two main models for this type of trading:
Step 2:
Key elements of pre-launch perpetual contracts include:
- Index Price: This is the average price of the asset on major exchanges, serving as the reference price for the futures contract.
- Funding Rate: A fee exchanged between long and short positions, influenced by the difference between spot and futures market prices.
- Mark Price: The official price of the contract, generally calculated from the actual bid/ask volume on the exchange.
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Pre-market Trading (OTC)
Pre-market OTC trading allows investors to buy or sell tokens that have not yet been officially launched. This method is ideal for those who want to own the asset itself rather than merely speculate on its price.To engage in this market, investors can either create or agree to buy/sell orders with pre-set prices and quantities of tokens. There are two main models for this type of trading:
- Whales Market: Engages in OTC trading through smart contracts, representing decentralized exchanges.
- Bybit Pre-market: Conducts OTC trading on the exchange, representing centralized exchanges.
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Advantages and Disadvantages of Pre-market Trading
Advantages For Token Issuers:- Facilitates price discovery by gauging market demand and supply.
- Enhances visibility of the token.
- Offers opportunities to secure advantageous positions.
- Provides the chance for early token ownership.
- Boosts trading volume and fee revenue.
- Attracts new users.
- Increases incentives for exchange tokens (if applicable).
- Lower liquidity.
- Higher price volatility.
- Limited information about the token, increasing the risk of mispricing.
- Fewer order types.
- Potential price discrepancies across exchanges.
Starting Pre-market Trading on Bybit
Step 1:Access Bybit and navigate to Trade → Pre-Market Trading.
Step 2:
For Makers: Choose the coin you wish to trade, click on Create Order, and select either Buy or Sell.
Enter the price and quantity, then confirm the order.
For Takers: Review the existing Buy or Sell orders. Once you find a match, click Sell or Buy to finalize the order. Orders must be fully completed without partial fulfillment.
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Conclusion
Pre-market trading in cryptocurrency introduces fresh opportunities and experiences for investors. While still a relatively new concept, it offers significant advantages to all parties involved in the market.However, it's essential to be aware of the associated risks and challenges to make informed trading decisions.
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