Overview

This article introduces what is Gate.io Pre-Market OTC and how it works. It is a service aiming to offer investors a place to trade tokens before it is officially listed in the spot market. This article gives details on trading procedures for buyers and sellers, the mechanism of token credentials (generally referred to as Points) , and the advantages and risks of Pre-Market OTC. Moreover, this article provides specific trading steps and a case analysis to help users get a better understanding of the Pre-Market OTC. Users can establish investment strategies flexibly and get early access to potential tokens at expected prices. However, there are also risks due to market volatility and insufficient liquidity.

1. How does Gate.io Pre-Market OTC work?

For sellers: As a seller, you need to collateralize some USDT (The amount is usually 100% of your order amount. Check the actual LTV on the page of the corresponding token for calculation). You can enter the ideal price and quantity to create an order via “Create Order”. The system will calculate the required collateral and trading fee. If you don’t want to create an order, you can directly select a suitable bid order in the market to sell the token. After a successful transaction, you need to make sure that there’s sufficient token balance for delivery. If you fail to deliver tokens before the delivery end time, all collateral will be forfeited.

For buyers: As a buyer, you need to make a payment using USDT. You can place a bid order with expected price and quantity via “Create Order”. The system will calculate the required trading fee. You can also directly select a suitable ask order in the market to make direct purchases. After the order is filled, you only need to wait for the delivery time, when the system will automatically transfer the tokens into your account. If sellers fail to deliver or fail to deliver the full amount, sellers’ collateral will serves as the indemnity and be sent to your account.

2. What is the Points in Pre-Market OTC?

Token credential, referred to as Points, is issued based on a preset total supply. After the project team releases the tokenomics, order amount in Points will be converted to tokens based on a point-to-token ratio, which is determined by their respective total supply. The order size will remain unchanged after the conversion. You can check the “Converted Amount” in order details to see the actual delivery amount and prepare for delivery.

How to deliver real tokens?: When the project team releases the total supply, order amount in Points will be converted to tokens based on a point-to-token ratio determined by their respective total supply. The order size will remain unchanged and the delivery amount will be increased or decreased proportionally.

3. The advantages of Pre-Market OTC

Lock in the price: Users can set the ideal price before the token gets officially listed to cope with potential market volatility.

Flexible investment options: Users can choose to act as a taker or maker and adjust trading strategies flexibly.

Risk management: Sellers need to use collateral as a guarantee of delivery. If sellers fail to deliver, all collateral will be forfeited and serve as an indemnity for buyers, reducing buyers’ risks.

Order management and cancellation: Users can check the open orders and order history, and cancel unfilled orders on the trading page. However, filled orders cannot be canceled. Therefore, users need to carefully check order details before placing an order.

4. Trading risks and precautions

Market volatility and liquidity risks: As the token is not yet listed, the market liquidity can be low in Pre-Market OTC, which can lead to a large bid-ask spread. Investors should exercise caution while trading.

Token listing delay or cancellation: If the token listing time is delayed due to market, project, or regulatory conditions, filled orders will still be valid and users need to wait for a new delivery time. If the token listing is canceled, the payment for filled orders will be returned in full amount and unfilled orders will be canceled.

Collateral risks: If sellers fail to deliver the tokens at delivery, their collateral will be forfeited. Therefore, sellers need to ensure that there’s enough token balance for delivery before the delivery time.

Order cancellation risks: Matched orders and filled orders cannot be canceled. Please exercise caution when creating an order or selecting to match an order.

5. Trading procedures in Pre-Market OTC

For sellers:

1. Pay collateral: Use USDT to pay the required collateral.
2. Create or select an order: Enter the expected price and amount, confirm transaction details and place the order or select a suitable bid order in the market.
3. Deliver tokens: Make sure to deposit enough tokens into your account before the delivery time.

For buyers:

1. Make a payment: Make a payment using USDT to buy tokens.
2. Create or select an order: Create a new order or select a suitable ask order in the market.
3. Wait for delivery: The system will transfer the tokens to the buyer’s account at delivery.

5. Case analysis

Suppose that user A wants to buy 100 tokens at the price of 5 USDT per token before the token officially gets listed and has deposited 500 USDT for this purpose. User B wants to sell the token at the price of 5 USDT for the same quantity. As both parties have agreed to the price and quantity, the transaction between A and B is matched. User A just needs to wait for the token delivery at the delivery time. And user B has the obligation to deliver the real token per the order. If user B fails to deliver the full amount of real tokens, the collateral paid by user B will be forfeited and transferred to A’s account as indemnity.

6. Conclusion

Gate.io Pre-Market OTC offers a platform for users to grasp ideal investment opportunities before tokens’ official listing. By placing bid or ask orders with the expected price and amount, users can flexibly establish investment strategies and get early access to token with potential growth. However, investors need to be aware of the potential risks such as market volatility and insufficient liquidity and exercise caution for funds security.