Bybit Pre-Market Perpetuals: Secure Early Gains and Hedge Effectively
The evolution of cryptocurrency trading platforms has led to increasingly sophisticated tools that cater to the diverse needs of traders. Bybit initially introduced Pre-Market Trading for Spot, capitalizing on the demand for early access to trading assets. Following the success of this initiative, Bybit expanded its offerings to include Derivatives, launching Pre-Market Perpetuals. This new trading product allows users to leverage and speculate on upcoming tokens before they’re accessible to the public, offering early exposure to potential market movers.
This article will explore how Pre-Market Perpetuals builds on the foundation of its Spot counterparts, providing insights into its functionalities and benefits.
Key Takeaways:
Bybit Pre-Market Perpetuals is an advanced trading platform designed to allow traders to speculate on and engage with the future value of tokens by using Perpetual contracts before they’re publicly available on Bybit Derivatives.
Bybit Pre-Market Perpetuals operates through a structured, phase-based approach that ensures both flexibility and rigidity where necessary to optimize trading outcomes.
What Is Bybit Pre-Market Perpetuals?
Bybit Pre-Market Perpetuals is an advanced trading platform designed to allow traders to speculate on and engage with the future value of tokens using Perpetual contracts before they’re publicly available on Bybit Derivatives.
This innovative product enables traders to interact with the market dynamics of up-and-coming tokens ahead of their public release. Bybit Pre-Market Perpetuals facilitates trading in Perpetual contracts that are denominated in USDT, providing a speculative platform for users to anticipate market trends and to position themselves advantageously in emerging tokens.
How Does Bybit Pre-Market Perpetuals Work?
Bybit Pre-Market Perpetuals operates through a structured, phase-based approach that ensures both flexibility and rigidity where necessary to optimize trading outcomes:
Phase I: Call Auction
This initial phase serves as the foundation for setting up pre-market trading. Traders submit their buy and sell orders, though these orders aren’t immediately matched. Instead, all orders are collected and stored until the CallAuction commences. During this phase, the platform evaluates all the submitted orders to determine a fair opening price by finding the price level that aggregates the most buy and sell agreements.
Traders can only place Good ‘til Canceled (GTC) limit orders. Once these orders are submitted, modifications to them — including changes to price or quantity, or adding conditions like TP/SL — aren’t allowed throughout the entire Call Auction phase.
Auction 1 (23 Hours 50 Minutes):
Estimated Opening Price: Traders are allowed to place or cancel orders. The estimated opening price is recalculated every minute for the first 23 hours, and then every five seconds during the last 50 minutes.
Price Parameters: Initially, the order price must not drop below half the market maker's suggested rate. In the latter part of this phase, the maximum buy price is capped at 1.1 times the last traded price (LTP), and the minimum sell price cannot be below 0.9 times the LTP.
Auction 2 (5 Minutes):
During these last five minutes, new orders can be placed but not withdrawn.
The estimated opening price updates every five seconds, with the buying cap set at 1.05 times the LTP, and the selling floor at 0.95 times the LTP.
Price Matching (5 Minutes): This phase starts once the order book reaches a minimum depth of 50 orders on both the buy and sell sides.
Mechanism: The system seeks a price yielding the highest volume of buy and sell orders. If multiple prices yield the same volume, preference is given to the price closest to the market maker’s initial recommendation.
Outcomes:
Failed: If fewer than 50 orders exist on either side, the auction is deemed unsuccessful, all orders are canceled and the contract will not be listed.
Successful: With sufficient orders, price matching commences and all compatible orders are executed at the auction price. Remaining unfulfilled orders persist in the order book, available for cancellation during the ongoing auction.
Fee Structure: There are no fees during this phase.
Phase II: Continuous Auction
This phase functions similarly to regular Perpetual trading, but includes unique features for Pre-Market Perpetuals.
- Order Types: Supports various orders including Limit, Market and Conditional, alongside features like TP/SL, Post-Only, GTC and Reduce-Only.
- Index Price Calculation: Uses metrics from CEX Spot prices, Bybit’s Pre-Market Spot Trading prices, average DEX prices and Mark Price. If necessary, the index price might be derived from the buy and sell order prices of the contract itself.
- Fee Structure: Non-VIP traders pay a taker fee of 0.1% and a maker fee of 0.04%. Based on their level, VIP traders benefit from reduced rates.
Phase III: Transition to Standard Perpetuals
Once a Pre-Market Perpetual contract is listed on at least three CEXs, it transitions to standard Perpetuals trading.
- Adjustments: Changes in risk parameters, fee structures and index price components may occur and will be communicated separately.
- Continuity: Trading activities continue seamlessly during the transition. Active orders and positions are retained, although orders fulfilled post-transition are subject to the new fee rates.
Liquidation
These mechanisms are supported by both Isolated and Cross Margin modes under a Unified Trading Account (UTA). As such, please note that UTA liquidation rules apply.
Scenario 1: UTA Liquidation Prior to Price Matching
Should liquidation occur within your Unified Trading Account before the Price Matching phase, all orders for Pre-Market Perpetuals linked to the account will be terminated automatically.
Scenario 2: UTA Liquidation During Price Matching
In the event of a UTA liquidation occurring during the Price Matching phase, the system will attempt to cancel your Pre-Market Perpetual orders.
Should the liquidation transpire after orders are already matched, the existing positions in Pre-Market Perpetuals will be closed to mitigate the risk of further liquidation.
Scenario 3: UTA Liquidation Throughout the Continuous Auction Phase
During the Continuous Auction phase, if a UTA liquidation is necessary, the system will adjust the limit tier based on the prevailing liquidity levels to manage the required margin through liquidation procedures. Consequently, your positions in Pre-Market Perpetuals could be forcefully closed in order to minimize the liquidation risk associated with your account.
Benefits of Using Bybit Pre-Market Perpetuals
The introduction of Bybit Pre-Market Perpetuals carries several key advantages:
Early Market Entry: Traders can access and speculate on the prices of new tokens before they hit the general market. This early entry is crucial in positioning for potential price surges that typically accompany new listings.
Leverage Options: With the ability to apply up to 5x leverage, traders can significantly amplify their trading power and potential returns without committing a large amount of capital up front.
Continuity of Positions: Unlike other pre-market instruments that may require closing and reopening positions upon official launch, Bybit allows the seamless transition of Pre-Market positions into standard Perpetual contracts. This continuity is vital for maintaining strategic positions through market transitions.
Risks of Using Bybit Pre-Market Perpetuals
Despite its attractive benefits, trading with Bybit Pre-Market Perpetuals involves certain risks that traders must consider.
Liquidity Concerns: Pre-Market phases often see reduced trading volumes, leading to lower liquidity. This can result in wider spreads between bid and ask prices, and might affect the ability to execute large orders without impacting the market price.
Increased Volatility: With fewer participants in the Pre-Market phase, price stability can be compromised, leading to heightened volatility. Such conditions can dramatically affect trading outcomes, especially if large, unmatched orders are driving prices.
Uncertain Funding Rates: In the absence of a robust index price during the early stages, funding rates can fluctuate unpredictably. These fluctuations may impact the cost of holding positions, thus affecting overall profitability.
Tracking Errors:Perpetual contracts aim to track the price of the underlying asset. However, there can be discrepancies due to various factors, such as funding mechanisms and market inefficiencies. These tracking errors can amplify your losses if the Perpetual contract price deviates significantly from the actual Spot price of the underlying asset.
Bybit Pre-Market Perpetuals vs. Bybit Pre-Market Trading
Distinguishing between Bybit Pre-Market Perpetuals and Bybit Pre-Market Trading is crucial.
Pre-Market Trading (Spot): Bybit Pre-Market Trading involves direct Spot trading of the actual tokens. It’s typically governed by the immediate supply-and-demand dynamics, making it highly sensitive to prevailing market sentiments.
Pre-Market Perpetuals: Bybit Pre-Market Perpetuals are Derivatives contracts that speculate on the price movements of tokens. They provide leverage, thus allowing for greater exposure without the need for full capital deployment. Unlike Spot trading, Perpetual contracts don’t involve the actual delivery of the asset, focusing instead on price movements.
Should You Use Bybit Pre-Market Perpetuals?
Engaging with Bybit Pre-Market Perpetuals is particularly suitable for traders who seek early access to potential market movements, and are comfortable managing the associated risks. This product is ideal for those looking to leverage market insights into actionable trading strategies ahead of the general public.
The Bottom Line
Bybit Pre-Market Perpetuals offer a strategic advantage in the fast-paced world of cryptocurrency trading, allowing traders to engage with market dynamics before a token's official release. While the opportunities for early engagement and leverage are significant, it’s vital for traders to understand and manage the risks involved. This balance of opportunity and risk management defines their potential success in using Bybit Pre-Market Perpetuals.
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