Traditional markets operate at certain hours on weekdays, with traders having the opportunity to place orders before and after the market ends — pre-market and post-market. It is this data that becomes the basis for forming the price of an asset at the beginning of a trading session, writes RBC Crypto.
Crypto exchanges operate 24/7, without breaks (except for technical work). At the same time, in 2024, against the backdrop of a large number of airdrops, the premarket migrated to the digital asset sphere. This is a tool that allows trading in tokens that have not yet been issued, setting prices and conducting transactions like futures.
How does premarket work?
Premarket on crypto exchanges allows you to earn on tokens that have not yet been officially launched or listed on the exchange. As a rule, this tool is calculated in stablecoins before the asset is released. It is assumed that in this way, users can participate in the formation of the price of a new cryptocurrency. However, the premarket price often differs significantly from the real one in a higher direction.
Most often, the premarket works on the principle of delivery futures. For example, in the case of the OKX crypto exchange, the instrument is calculated in USDT on the expiration date. If the new asset was listed on the platform, then the calculation is made before the listing. At the same time, the exchange reserves the right to remove futures if the project team cancels the token issue or faces other insurmountable problems or excessive risks.
Types of premarket platforms
In addition to pre-market futures described in the previous section, there are other platform options. For example, one of them is directly related to TGE (from English Token Generation Event) – the official launch of a token on the blockchain and its distribution to the addresses of users, investors, partners and other parties.
It works like this: a buyer places an order at a certain price, and the seller uses the collateral to define a sell order. The trade is given a deadline (usually a few hours after TGE to execute the order). Otherwise, there is a penalty.
Another option is trading points (incentive points for activity in the project, like a loyalty program). However, unlike TGE, a point does not guarantee receiving tokens. Points have no value and can only potentially be converted into real assets in the future.
There are even decentralized pre-market platforms that operate on the same principle as other DEXs. They operate on smart contracts and do not require a third party to act as a trusted party.
Millions of pre-market trading volumes
In just two months, the volume of pre-market futures trading in Hamster Kombat on the Bybit and OKX crypto exchanges has exceeded 2 million USDT. The amount of transactions on OKX is five times higher than on Bybit.
Hamster Kombat’s TGE and token airdrop are expected on September 26. On the same day, OKX will launch spot trading of the altcoin paired with the USDT stablecoin. It is important to note that such dates are often not final. Cryptocurrency projects tend to postpone deadlines, since they cannot always cope with the influx of users.
The Pros of Premarket Markets
It is believed that premarket allows traders to roughly estimate the value of a future asset, as well as interest in it and other potential trends. However, often after listing, the price of a token differs significantly from premarket figures.
Pre-market trading also helps to assess interest in a new asset. Trading volumes on the pre-market can help to understand the potential and attractiveness of a token that has not yet been issued. If there are many transactions with it, this is a positive sign.
The premarket helps to create liquidity for the new token. This reduces the risks of price fluctuations after listing, including due to the large number of buy and sell orders at the start of trading.
Disadvantages of Premarket Markets
The price of assets before the launch is subject to high volatility, and the rate formation is not transparent. Also, due to low liquidity, pre-market orders may be executed more slowly and under less attractive conditions.
The pre-market market may create false impressions about the future price of an asset. This may lead to additional losses if the user incorrectly estimates the rate at which the asset will trade in the first hours after listing.
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Source: Cryptocurrency
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