Pre-market contracts: A double-edged sword for token launches: front-end price discovery or overdrawing future expectations?

Pre-market contracts and trading have become a pivotal yet double-edged component in token launches, shifting price discovery earlier and transforming token listings from single events into extended processes.

What is the pre-market?
It's a trading environment provided by third-party platforms before a token's official launch, using futures contracts or subscription rights to simulate market behavior, facilitate price discovery, and allow speculation or hedging.
Evolution of pre-market trading
- Began with small-scale, illiquid OTC deals within trusted circles.
- Evolved into IOU tokens and OTC platforms like Whales Market, which were shallow and prone to manipulation.
- Now dominated by large centralized exchanges (e.g., Binance, Bitget) and decentralized platforms like Hyperliquid, offering standardized perpetual contracts with improved risk controls.
Positive impacts
- Enables early price discovery, helping set more reasonable official listing prices.
- Builds prolonged market attention and consensus through pre-launch trading activity.
- Provides hedging tools for early investors and team members with locked tokens.
- Attracts market makers and institutions due to visible trading interest.
Negative impacts and challenges
- Risk of "expectation fulfillment," where overhyped pre-market prices lead to post-launch sell-offs (e.g., WLFI token).
- Low liquidity in early stages makes the market vulnerable to price manipulation by whales.
- Exposes systemic risks related to oracle mechanisms and position management, as seen in Hyperliquid’s XPL contract.
- Weakens project owners’ control over token pricing, transferring influence to speculative pre-market activity.
Strategic implications for projects
- Token launches must now be managed as continuous processes, not one-time events.
- Projects need to actively manage market expectations through transparent communication and updates.
- Thoughtful tokenomics—including vesting schedules and circulation plans—are critical to post-listing price stability.

Investors are advised to thoroughly research project fundamentals and acknowledge the high volatility and manipulation risks in pre-markets, investing only what they can afford to lose.

By Karen Z, Foresight News

Pre-market trading and pre-market contracts have gradually become important links in the launch of popular tokens.

This mechanism, in which a third-party trading platform provides trading channels before the token is officially launched, not only changes the timeline of price discovery by releasing market price signals in advance and attracting investor attention, but also affects the initial performance of the token after it is officially launched.

This article will systematically review the evolution of the pre-market market and explore its impact and challenges on token launch strategies.

What is the pre-market and how does it work?

The pre-market trading environment is a pre-market trading environment offered by third-party trading platforms before a token's official launch. This type of trading, often conducted through futures contracts or token subscription rights, simulates real market behavior to facilitate price discovery, test market sentiment, and provide early investors with opportunities for speculation or risk hedging.

The pre-market contract market has been particularly noteworthy recently, enabling users to speculate on the price of a token before it goes public.

Different platforms have different pricing mechanisms. For example, Binance's recently launched pre-market futures contracts use a dynamic mark price, which averages the trading prices over the past 10 or 20 seconds and updates every second. To mitigate abnormal fluctuations, the mark price fluctuation is limited to ±1% per second. If fewer than 41 transactions are completed within 20 seconds, the average of the 40 most recent transaction prices is used to enhance resistance to manipulation.

The "Hyperp" contract launched by the decentralized derivatives exchange HyperLiquid initially experimented with a pricing mechanism that didn't require an external oracle, with the funding rate anchored to the 8-hour EMA mark price. However, after experiencing extreme market conditions in the XPL contract, team members announced plans to incorporate external pre-market contract price data and adopt a hybrid pricing model to enhance robustness.

The Evolution of the Pre-Market

In the early days of cryptocurrency, the so-called "pre-market market" was almost non-existent or extremely immature. It was primarily OTC trading on a very small scale. Early angel investors, advisors, or team members might privately transfer their equity or promises of future tokens, but these transactions:

Limited to a close circle with a basis of trust.
Each transaction is negotiated individually, and there is no unified price discovery mechanism.
Very poor liquidity: It is difficult to match buyers and sellers.

Subsequently, with numerous projects raising funds, tokens often faced delays of months or even a year before they were listed on exchanges. During this period, the enormous speculative demand gave rise to the pre-market trading market. Some centralized exchanges launched "IOU" (I Owe You) tokens, representing a claim on future tokens.

Later, there were also OTC DEXs like Whales Market, which supported over-the-counter trading, pre-market token markets, and points markets. These pre-market trading markets were shallow, prone to price manipulation by whales, and exhibited high volatility.

As the problems of the previous phase became apparent and the market continued to develop, control began to shift to large centralized exchanges and Hyperliquid. Since the second half of last year, these exchanges have attempted to "standardize" pre-market trading and integrate it into their own ecosystems. For example, Binance uses a mining scheme to allow users to pre-subscribe to tokens at a fixed price and then launch pre-market trading, creating a combination product and a relatively "controllable" pre-market market.

In pre-market trading offered by Bitget, buyers and sellers can place orders in advance, execute trades as needed, and then complete settlement. In this case, sellers don't need to hold any new coins in advance; they just need to obtain enough new coins to settle before the designated settlement time.

Since the beginning of this year, pre-market trading has increasingly focused on perpetual contracts, with pre-market activity increasingly concentrated in these products. Pre-market contracts offered by mainstream exchanges like Binance, Bitget, Bybit, and OKX not only provide price discovery but also effectively manage market risk through risk control measures such as maximum leverage limits, multi-tiered margin systems, and price fluctuation ranges. Furthermore, HyperLiquid's "Hyperp" pre-market contract has also been active, with significant increases in market interest and trading activity.

From the simple IOU certificates in the early days to the complex pre-market perpetual contracts today, the evolution of the pre-market market reflects the market's ever-increasing demand for liquidity, speculation efficiency and risk management.

The impact of pre-market markets on token launches

The pre-market market/pre-market contracts have changed the gameplay and logic of token launches. Its impact is multifaceted and it is an absolute double-edged sword.

In general, it transforms token launch from a "momentary event" into a "continuous process", advancing price discovery from the moment the token goes online.

Positive impact

1. Pre-emptive price discovery mechanism

Traditional model: Before a token goes online, its price remains a black box. The opening price is determined by the project owner and the exchange based on private placement round prices and market sentiment, which can easily lead to significant deviations (such as breaking the issue price at the opening or experiencing sudden price increases or decreases).
The pre-market/contract market forms a constantly changing, market-driven expected price through continuous market trading. This provides a price reference for projects, exchanges, and the community, helping to set a more reasonable and market-accepted spot opening price and smoothing out fluctuations during listing.

2. Strong market preheating and consensus building

Pre-market trading can maintain continuous attention for weeks or even months, prompting traders and KOLs to deeply research project fundamentals, token economics, and team background to make trading decisions.
This continued attention is equivalent to long-term, free market education for the token listing, which can attract a wider user group when the token goes online, rather than just those users who have been "lying in ambush" early on.

3. Provide risk hedging tools for early supporters

Early private investors, advisors, and team members often hold a large number of tokens with a vesting period. They face the risk that the price of their tokens will be lower than their cost price after they are unlocked.
Pre-market contracts allow them to hedge this downside risk and lock in profits before the token is listed.

4. Attract attention from market makers and institutions

Active pre-market trading volume and high attention are evidence of a project's potential. This attracts professional market makers and institutional investors, who are more willing to provide post-listing liquidity services for the project, which is crucial for the long-term healthy trading of the token.

Negative impacts and challenges

1. "Expected fulfillment" and weak launch performance (the core risk)

If the pre-market price is over-hyped, forming an inflated expected price, then when the token is actually listed, the classic operation of "buying expectations and selling facts" will occur, seriously undermining market confidence.
Take WLFI, for example. On September 1, 2025, WLFI (the token for World Liberty Financial, a Trump family project) officially launched. Pre-market trading began weeks before the launch, and the price saw a significant surge driven by speculative capital. However, the price quickly fell after the token's launch. Even with support from multiple platforms like Binance, Upbit, and Coinbase, the price lacked upward momentum, suggesting that speculative demand had been over-absorbed before the market opened.

2. Insufficient liquidity and price manipulation are rampant

The pre-market futures market is typically illiquid in its early stages. This means that whales or arbitrageurs can manipulate the contract price with relatively small amounts of capital, creating false signs of FOMO or FUD.
Manipulated price signals can mislead the entire market and may also cause retail investors to blindly chase rising and falling prices. The extreme market fluctuations of Hyperliquid XPL on August 25th are a typical example of pre-market manipulation.

3. Systemic risk

The extreme market conditions of Hyperliquid XPL also exposed the weaknesses of pre-market contracts in risk control, oracle mechanisms, and position management.

4. Weakening the project owner’s pricing power

In the traditional model, project owners and market makers have a significant degree of control over the opening price. Now, this power has been ceded to a certain extent to the pre-market, which is particularly likely to be dominated by short-term speculation, putting project owners under greater pressure to manage market expectations.

A fundamental change in token launch strategy

Although pre-market trading still faces problems such as thin liquidity, expectation fulfillment, and price manipulation, its positive role in price discovery, risk management, and market efficiency cannot be ignored.

Faced with the irreversible trend of pre-market influence, project owners need to continuously optimize their launch strategies:

The shift from token launch to launch management: Projects are no longer solely focused on the launch date. They must proactively guide positive sentiment by releasing product updates, partnerships, exchange announcements, and transparent token economics, combating potential manipulation and FUD, thereby stabilizing market expectations throughout the pre-market period.
Token economics design is even more critical: Projects must carefully design their token vesting plans. A reasonable initial circulation volume, lock-up mechanism, and vesting rules are crucial for stabilizing post-listing prices.
Project parties need to pay more attention to token economics and long-term community building.

Investors must have a thorough understanding of the project's fundamentals before participating in pre-market trading. They must also be fully aware of the significant volatility and manipulation risks associated with low liquidity and only invest funds they can afford to lose. In extreme market conditions like Hyperliquid XPL, even seemingly robust hedging strategies can be wiped out in an instant due to manipulation by whales and extreme volatility.