The practice of pre-launch token trading is becoming increasingly popular among cryptocurrency investors, despite the fact that it can introduce up to 20 times more price volatility compared to post-token launch trading.
According to a report from Keyrock, cryptocurrencies such as Wormhole’s (W) token experienced over 3,000% volatility before their token generation event (TGE), compared to around 100% volatility one week after the coin was launched. The data was measured using historical volatility based on the seven-day standard deviation returns, using the volume-weighted average price (VWAP).
Similarly, the Jupiter (JUP) token saw its volatility rise to around 2,800% pre-launch, before falling to around 150% one week after launch.
Understanding how market liquidity affects a token’s volatility can help traders make more informed decisions, the Keyrock report suggests.
The lack of liquidity in pre-launch markets means that the price discovery phase, where an asset’s price is determined by buyers and sellers, is often absent. Despite this, pre-TGE trading remains popular among risk-taking investors who hope to gain early exposure to new crypto projects in the hopes of higher returns.
Many pre-launch buyers, particularly large investors or “whales,” are driven by the fear of missing out on a potentially lucrative investment. This often leads to whales buying in at relatively high prices, as the increased volatility of pre-TGE markets makes them unprofitable for most buyers.
However, despite the initial volatility, over 95% of pre-token investors in ENA and PIXEL tokens are currently profitable. The ENA token has seen a 14% increase since its launch, while the Pixel coin has experienced a 31% decrease since its token generation event.
On the other hand, not all token launches have been successful. More than 60% of pre-token investors in Portal (PORTAL) have incurred losses, with the token down over 82% since its launch at the end of February.
In related news, Coinbase recently experienced a system-wide outage that affected user withdrawals, although the platform has since recovered.