What exactly is pre-launch token trading?

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What if we told you there was a way to invest $1 and get $3,000 in return?

The wise words of Seb’s first-year economics teacher, Mrs. Lebowski, begin to resonate: “Sounds too good to be true? Probably.”

BUT, it’s an interesting concept.

Today we delve into the pre-launch of token trading.

This is how it works:

When a company first announces that their token is going live on a decentralized exchange (DEX), they often offer a portion of the tokens to be made available for ‘pre-market trading’.

The idea is that super-sharp beans can grab tokens at a low price, providing liquidity to the market, which can then be used for token trading after launch.

The problem is that if you’re one of the first to put money into a token, there’s really no benchmark for what a ‘fair’ market value is, so the price can be wildly volatile.

In another shoutout to Ms. Lebowski, it could be said that in pre-launch token trading there is almost no chance of reaching ‘equilibrium’.

(Not enough supply, or enough demand).

That’s exactly what happened with cryptocurrencies like Wormhole’s (W) token, which saw a 3,000% increase in value before launch, compared to around 100% a week after the coin launched.

So while it is technically possible to turn $1 into $3,000 with this strategy, it is also possible that if the crypto project is a flop, your $1 becomes $0.

(And let’s face it, we’re all human, the chances of us investing just $1 in something like this are slim).

Be careful out there and every time you hear about these possibilities, let Ms. Lebowski’s words ring in your ears:

“Does it sound too good to be true? Probably.”