Crypto Pre-Markets: Buying and Selling Points and Tokens Before Launch

Crypto pre-markets allow users to buy and sell tokens before they are officially released or listed on exchanges. In this format, sellers deposit collateral, and buyers send funds, with an agreement to settle when the Token Generation Event (TGE) is complete. This article will provide a comprehensive overview of crypto pre-markets, how they work, their benefits, risks, and a specific example of a popular pre-market trading platform: Whales Market.

Table of Contents

1. What are Crypto Pre-Markets?
2. Why are Pre-Markets Becoming More Popular?
3. How Pre-Markets Work
4. Popular Types of Pre-Market Trading
5. Introducing Whales Market
6. Pre-Market Trading on Whales Market
7. Trading Points on Whales Market
8. Conclusion

What are Crypto Pre-Markets?

Crypto pre-markets are a form of trading that allows users to buy and sell tokens before they are officially released or listed on exchanges. This creates an opportunity for investors to participate in the early stages of a potential project, taking advantage of price volatility before the wider market has access.

In pre-markets, sellers (usually those who have received token allocations through airdrops, pre-sales, or other programs) agree to sell their tokens to buyers after the TGE takes place. To ensure a smooth transaction, sellers are often required to provide collateral as a commitment. Buyers must also deposit funds into the platform.

Once the TGE is complete and the tokens are distributed, the transaction will be executed. The pre-market platform acts as an intermediary, ensuring that both buyers and sellers fulfill their obligations.

Key Advantages of Crypto Pre-Markets:

• Early Access: Opportunity to invest in potential projects before they become mainstream.
• Capitalizing on Price Volatility: Buying and selling in the early stages, where prices can fluctuate significantly due to news and expectations.
• Price Discovery: Pre-markets can help determine the initial market value of a token.

Risks of Crypto Pre-Markets:

• Project Risk: The project may fail or delay the token release.
• Liquidity Risk: It can be difficult to find buyers or sellers, especially for lesser-known tokens.
• Scam Risk: Scam projects may use pre-markets to attract capital and disappear.
• Legal Risk: Regulations regarding pre-markets may not be clear in some jurisdictions.
• Technical Risk: Errors in smart contracts can lead to loss of funds.

Why are Pre-Markets Becoming More Popular?

Pre-market platforms are becoming increasingly popular because they address several issues that exist in traditional P2P trading before a token launch:

• Risk Mitigation: These platforms provide a safer environment for trading, reducing the risk of fraud and breach of agreements.
• Increased Liquidity: Connecting buyers and sellers from around the world helps enhance liquidity.
• Better Price Discovery: With more participants, prices on pre-markets can more accurately reflect the true market value of the token.
• Useful Information: Pre-markets provide insights into the financial strength of an asset before official trading begins. Demand and the number of sellers willing to sell can be important indicators for investors.

How Pre-Markets Work

Pre-markets operate similarly to traditional P2P trading platforms, but with a key difference: pre-markets maintain custody of funds from both parties until the conditions are met.

The general process is as follows:

1. Order Creation: Traders create buy or sell orders, specifying the price and quantity of tokens or points they want to trade.
2. Collateralization: Sellers are typically required to deposit collateral to ensure they will provide the tokens when the TGE is complete.
3. Payment: Buyers must pay the full value of the tokens or points they want to buy.
4. Custody: The buyer's funds and the seller's collateral are held securely, usually by a smart contract (in the case of decentralized platforms) or by a custodian (in the case of centralized platforms).
5. Transaction Execution: When the TGE is complete and the seller provides the tokens, the transaction is executed, the buyer's funds are transferred to the seller, and the tokens are transferred to the buyer.
6. Breach Handling: If the seller fails to provide the tokens within the stipulated time, the buyer can claim compensation from the seller's collateral.

Popular Types of Pre-Market Trading

There are various types of assets that can be traded on pre-markets, each with varying degrees of risk and potential:

• Pre-TGE Token Trading Market: This is the most common type of pre-market, focusing on trading tokens before they are distributed or listed on exchanges. Sellers are often those who have received airdrops or participated in pre-sales, while buyers hope to profit from the initial price volatility.
• Point Markets: Many projects reward users with points based on their activity on the platform. These points have no direct monetary value, but the project may convert them into tokens in the future. Point markets allow users to buy and sell these points, creating a speculative market on their potential value.

Introducing Whales Market

Whales Market is a multi-chain OTC and pre-market platform, initially deployed on the Solana network. Since then, the platform has expanded to Base, Arbitrum, Ethereum, and several other networks.

Whales Market uses a smart contract protocol to handle pre-market orders and OTC trades. The goal of the platform is to provide the safest way to execute P2P transactions for pre-launch tokens, points, and regular OTC swap trades, as the smart contract eliminates the need for third parties or centralized admins/custodians.

Unlike centralized solutions, Whales Market claims that every process on the platform is permissionless and automated using smart contracts deployed on their respective blockchains. Whales Market has overseen pre-market trades for several notable projects that have performed their token generation event since its launch. Some of these projects include Starknet, Wormhole, and Aevo.

Pre-Market Trading on Whales Market

On the pre-market platform, traders can create and execute orders for unreleased tokens using smart contracts.

The sell-side smart contracts manage the collateral custody presented by the seller and the application of penalties in the event that the seller fails to provide the agreed-upon amount of tokens before the settlement deadline. On the buyer side, a smart contract is developed to handle the buyer’s funds custody and the release of the agreed-upon assets to the buyer when they are supplied by the seller.

The buyer’s funds and the seller’s collateral are locked in a conditional-based contract awaiting the fulfillment of the trading conditions from both parties. In the event that the seller fails to supply the assets, the buyer can claim a certain amount from the seller’s collateral.

Trading Points on Whales Market

Points from projects such as Kamino, Ether.fi, and friend.tech can be traded on Whales Market. The Points Market allows users to speculate on these points before they are converted into actual tokens. The technology behind the Points Market is similar to the Pre-Market. However, in the Points Market, the seller can only request settlement for the points after they have been converted into the proper token. In the event that the points are not converted into a token by the project, the order is canceled and the funds are returned to the buyer, for the order that has been executed.

Whales Market claims that the smart contracts deployed at both ends of the transaction ensure that users can securely trade their points without trusting each other or reporting to a central authority. Conditional-based contracts for the Points Market consider the conversion of points to tokens a probability until an official announcement regarding the matter by the project, in which the funds from both parties are held in the smart contract until these conditions are certain and met.

Conclusion

Pre-markets are a highly speculative area, allowing traders to get an early start on trading tokens before they are distributed and listed on exchanges. Pre-markets also provide investors with a safer alternative for buying pre-launch tokens, as they involve neutral third parties (centralized institutions) or decentralized smart contracts for the smooth enforcement of a transaction.

If you are looking to trade tokens before launch, you can consider centralized platforms such as Kucoin or Bybit, or decentralized platforms such as Whales Market, which also offers additional trading opportunities for points and OTC trading.

Pre-markets are still in their early stages, and users should do their own research before buying any pre-launch points or tokens. Note that this article is only intended to educate readers about pre-market platforms and how they work, and should not be considered financial advice.