Introduction

This article introduces the Gate.io’s Pre-Market, emphasizing its innovations and flexibility compared to the traditional OTC trading. By staking USDT to mint PreTokens, users can invest in advance and gain the potential returns. This article explains the advantages, mechanism, how both buyers and sellers gain profits by selling high and buying low, or holding the tokens until the settlement to achieve the profit. In addition, we provides the specific case studies to help users to understand the application of different strategies. Finally, it is reminded that all users should understand the relevant rules when they are participating in Pre-Market to reduce risks and achieve returns.

Gate’s Pre-Market stands out from traditional OTC trading in that it introduces a PreToken spot market to allow buyers and sellers to trade the PreToken more flexibly, significantly enhancing market liquidity. Both buyers and sellers can execute the trades through book order matching in the PreToken spot market. The main advantages of Pre-Market include:

• Early access to trading opportunities : One of the advantages of Gate.io’s Pre-Market is that users can trade the PreTokens before they are officially listed, allowing users to acquire the tokens before the official listing and plan ahead.
• Market insights and price discovery : Early price discovery before public trading is made possible, which gives early participants an edge on market prediction and thus make a better investment strategy.
• Enhanced liquidity : The PreToken spot market makes it easier for users to enter and exit transactions, and thus attract more users to trade and the liquidity becomes higher as a result. In a liquid market, transaction becomes even more smooth and efficient.

How does Pre-Market Work?

Mint the PreToken:

Users can mint PreTokens by staking USDT. When the new token is officially listed, users must complete the delivery to get their staked assets back. During the delivery process, the system will automatically deduct the real tokens from the user’s account based on the PreToken minting orders. If the delivery is successful, the staked USDT will be returned to the user.

PreToken spot market:

The PreToken spot market provides a place for buyers and sellers to trade the PreToken. The PreToken spot market will be closed before the actual spot market listing, and the system will take a snapshot of the users who are still holding PreTokens at the time of the closure. During the settlement, these users will receive the corresponding real tokens and their forfeited assets(if any).

How to Profit from Pre-Market?

For buyers:

Buyers can profit by the following two methods:

1. Buy low and sell high:

In the PreToken spot market, users can profit by buying PreTokens at a lower price and selling when the price rises.

Example:

As the price of CATI in the Pretoken spot market rises, user A purchases 1,000 CATI PreTokens at 0.45 USDT and sells them at 0.65 USDT, resulting in a profit of (0.65 - 0.45) × 1,000 = 200 USDT.

2. Hold the PreToken until the settlement

Users can purchase PreTokens in the PreToken spot market and hold them until the PreToken spot market closes, then receive the real tokens and their forfeited assets (if any) upon settlement.

Example:

As the CATI in the PreToken spot market is on a rising trend, user B purchases 1,000 CATI PreTokens at the price of 0.45 USDT and holds them until the snapshot for settlement. At the end of delivery, CATI Premint project has a total of 921,313 CATI tokens delivered and 475,675 USDT in forfeit due to default on delivery. These tokens and USDT are then shared proportionally among CATI PreToken holders. The total amount of CATI PreTokens minted is 1,439,552.

The amount of CATI tokens User B will receive =
(Snapshot amount / Total minted amount) × Actual delivery amount = (1,000 / 1,439,552) × 921,313 = 639 CATI
The amount of of USDT User B will receive =
(Snapshot amount / Total minted amount) × Remaining staked assets amount = (1,000 / 1,439,552) × 475,675 = 330 USDT
The price of CATI is around 1 USDT when it is listed. User B’s expected profit = 1×639+330-450= 519 USDT

For sellers:

Sellers can also profit by the following three methods:

Selling high and buying low:

After staking USDT to mint the PreToken, users can sell the PreToken when the price is high and buy the same amount of PreTokens back after the price drops and then “Unstake” to redeem their staked funds. As long as the earning from price difference exceeds the unstaking fee, the user will make a profit.

Example：

User C stakes 160 USDT to mint 10000 DOGS PreTokens and sells them at a price of 0.008 USDT each. When the price drops to 0.002, C buys 10000 DOGS PreTokens and uses the “Unstake” function to redeem staked assets. After deducting a 2% (3.2 USDT) fee for the unstaking, user C’s profit is calculated as:(0.008−0.002)×10,000−3.2=56.8 USDT.

Short selling with leverage to maximize profits

This method is an advanced “sell high, buy low.” Users can stake USDT to mint PreTokens when the price is high, and then sell the PreTokens to gain USDT, and repeat the cycle by staking and selling again. Once the price drops, users can buy back the PreTokens and use the “Unstake” function to redeem their staked assets, doubling their profits.

Example：

User D stakes 160 USDT to mint 10,000 DOGS PreTokens when the price is 0.008 USDT, and sells them at 0.008 USDT, receiving 80 USDT;

Then, D uses the 80 USDT to stake and mint 5,000 DOGS PreTokens at a price of 0.008, then sells them at 0.008, receiving another 40 USDT;

Similarly, D uses the 40 USDT to stake and mint 2,500 DOGS PreTokens at a price of 0.008, then sells them at 0.008, receiving another 20 USDT.

When the price drops to 0.002, user D uses 35 USDT to buy 17,500 DOGS PreTokens and then uses the “Unstake” function to redeem the staked assets. The following unstaking fees are deducted: 0.8 USDT, 1.6 USDT, and 3.2 USDT. The redeemed staked assets are: 40 USDT, 80 USDT, and 160 USDT.

User D’s profit is calculated as: 80+40+20−35−0.8−1.6−3.2=99.4USDT

Deliver real tokens and earn the profit:

Users can mint and sell the PreToken when price is high. At the time of settlement, they can buy or deposit the real tokens to complete the process and earn the profits.

Example:

User E stakes 160 USDT to mint 10,000 DOGS PreTokens when the price is 0.008, and sells them at 0.008. After the token is officially listed in a standard spot market, the price drops to 0.001. User D buys 10,000 DOGS for delivery and successfully get the staked 160 USDT back.

User E’s expected profit is calculated as: 0.008×10000-0.001×10000= 70 USDT

Conclusion

Gate.io’s Pre-Market provides users with the opportunity to participate in new projects, allowing investors to engage in token trading before the tokens are officially listed. They can choose to hold until delivery or pursue short-term arbitrage based on their preferences. Gate.io’s innovative Pre-Market brings more diversified investment options to the crypto market. However, to minimize risks and maximize returns, users should fully understand the Pre-Market rules and participate with caution.