TL;DR

• Pre-launch token trading can have incredible returns, but it can also end in disaster - but what is ‘pre-launch token trading’?

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What if we told you there was a way to invest $1 and get $3000 in return?

The wise words of Seb’s 1st year uni economics teacher, Ms Lebowski, start to ring: “sounds too good to be true? It probably is.”

BUT, it’s an interesting concept.

Today we’re digging into pre-launch token trading.

Here’s how it works:

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

The idea being that super keen beans can snatch up tokens at a low price, providing liquidity to the market, which can then be used for post-launch token trading.

The problem is, 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 achieving ‘equilibrium.’

(Not enough supply, or enough demand).

Which is exactly what happened to cryptocurrencies like Wormhole’s (W) token which saw a 3,000% increase in value pre-launch, compared to around 100% one week after the coin was launched.

So, while it’s technically possible to turn $1 into $3000 with this strategy, it’s also possible that if the crypto project is a flop, your $1 could become $0.

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

Be careful out there and any time you hear of these opportunities let Ms Lebowski’s words ring in your ears:

“Sounds too good to be true? It probably is.”