Coinbase International is following in the footsteps of centralized exchanges such as Binance, Bybit, Bitget, and OKX in creating a launchpad for up-and-coming crypto projects. 

"Pre-launch markets allow users to trade perpetual futures contracts on tokens that have not launched yet," Coinbase developers revealed on June 17, adding: "When the underlying token is launched on applicable spot exchanges, the instrument converts to a standard perpetual contract."

The feature will be available to institutional investors via Coinbase International and retail traders via Coinbase Advanced. Pre-launch market assets are capped at an initial margin of 50%, or two-times leverage, and a notional position limit of $50,000 per token.

The instrument also functions differently than traditional standard futures:

"Pre-launch markets have a different index price mechanism than standard perpetual futures and use a 4-hour exponential moving average (EMA) of the instrument’s mark prices for the Pre-Launch Index Price."

Developers also warned that "given the high-risk nature of pre-launch markets, these markets are more prone to lower liquidity, higher volatility and increased liquidation risk." In addition, pre-launch instruments are not supported by the exchange's Liquidity Support Program, resulting in added risks of auto-liquidation.

There is also a chance that pre-launch tokens may never make it to the full listing process, as Coinbase International staff explains:

"There is a risk — outside of Coinbase’s control — that the underlying token may never launch. If such a determination was made, the pre-launch market would not be able to convert into a standard perpetual futures market, and the market may need to be suspended and/or delisted."

Launched in May 2023, Coinbase International is the overseas arm of the namesake U.S.-based exchange. The platform holds a class F license from the Bermuda Monetary Authority (BMA). 

Related: Fireblocks adds Coinbase International for perpetual futures, spot trading