The exchange introduces 'pre-market trading' mainly to meet market demand, increase its competitiveness, and generate revenue. Whether users can make money by short selling depends on complex market dynamics, which is not a 'completely free' market behavior and involves significant structural risks.
Below is a detailed analysis of pre-market trading in relation to the questions raised:
💡 Why did the exchange introduce pre-market trading?
The exchange offers pre-market trading mainly due to the following commercial and market demands:
1. Meeting market demand and attracting traffic: Before tokens are officially circulated, there is a huge demand for speculation and risk management in the market. Providing pre-market trading can attract early followers and traders, bringing significant traffic and activity to the platform.
2. Achieving early price discovery: The traditional token listing model, where the opening price is like "opening a blind box," can be subject to severe fluctuations. Pre-market trading creates a continuous market where buyers and sellers compete, forming an expected price, helping to stabilize prices when tokens are listed.
3. Providing risk management tools for specific groups: This is crucial for early project investors, advisors, and airdrop recipients. They face the risk of price decline before token unlocking and can hedge against future spot devaluation risks by shorting futures in the pre-market, locking in profits in advance.
4. The tacit understanding of the business ecosystem: Some analyses point out that this is a "tacit arrangement" between exchanges, market makers, project parties/early investors: exchanges gain traffic, market makers achieve early price discovery, and early holders can hedge risks, with all parties accepting relevant risks under the premise of potential profits.
📈 Can users make money by shorting?
Although shorting provides the potential to profit during a downturn, the actual game is extremely complex. The design of the pre-market exposes shorting to unique systemic risks and is not a guaranteed profit.
The logic of profiting (or hedging) from shorting holds: Like $ZAMA ZAMA early holders, if they short at $0.075, they can acquire spot at a cost of $0.005 in the future, and the price difference is profit. This is a rational hedging behavior.
But there are huge risks—"crowded trades" and "liquidations": The structural issue in the pre-market is that many early holders may simultaneously adopt the same short hedging strategy. This "crowded trade" leads to a one-sided short market, becoming very vulnerable.
Once the price rises (even slightly), many short sellers may be triggered to stop-loss or face forced liquidation (margin call). This "liquidation" can sharply drive up prices, forming a "short squeeze," resulting in collective losses for short sellers. This is the trap of "shorting to make money."
⚠️ Is this a complete market behavior?
Pre-market trading is not a purely free market due to its inherent structural flaws and high manipulation risks:
1. Characteristics of non-complete market behavior: Its price is dynamically determined by the internal platform, lacking external spot market references, making it easy to form a self-referential, manipulable cycle. Liquidity is usually very low, meaning a few "whales" can significantly impact prices with relatively little capital.
2. A high-frequency area of market manipulation: The low liquidity of the pre-market and predictable liquidation clusters (i.e., price points where a large number of short orders concentrate) make it a perfect target for predatory trading strategies like "momentum ignition." These strategies aim to artificially create price fluctuations, triggering chain liquidations for profit. Some market analyses indicate that up to 78.5% of new token listing methods may disrupt fair price discovery.
💎 Summary: A complex game of intertwined opportunities and risks
Overall, pre-market trading is a complex game where both opportunities and risks are amplified:
· For exchanges and early investors: It is a useful tool (traffic, hedging).
· For ordinary traders: It is a high-risk investment venue.
· Making money by shorting is not guaranteed; success depends on whether one can position themselves before the "crowded trade" forms and exit before the "short squeeze" occurs, which requires high timing and risk control.
