Pre-launch token trading is 20 times more volatile than post-launch trading – Kirock

Pre-launch token trading is a growing trend among cryptocurrency investors, despite introducing up to 20 times the price volatility of post-token launch trading.

Prior to their Token Generation Event (TGE), cryptocurrencies such as the Wormhole (W) token experienced over 3,000% volatility, compared to around 100% a week after the coin's launch, as measured by historical volatility based on seven-day standard deviation returns. On a volume-weighted-average-price (VWAP) basis.

Similarly, Jupiter (JUP) token volatility rose to 2,800% pre-launch, falling to 150% a week after launch, according to a Keyrock report shared with Cointelegraph.

According to Kierok's report, understanding how market liquidity affects token volatility can help traders take more calculated risks.

“The volatility before and after the TGE highlights the critical role volatility plays in stabilizing markets. This event not only serves as a critical indicator of the importance of sufficient market depth for effective price discovery, but also serves as a critical indicator for both buyers and sellers.”

The price discovery phase of pre-TGE tokens has been lost due to the lack of liquidity in the pre-launch markets. In finance, price discovery refers to the time when the price of an asset is determined by buyers and sellers.

“Without liquidity, there is no discovery of value” – Kierkek

Despite the lack of volatility and volatility, pre-TGE trading has been a growing trend among more risk-averse investors who want to be the first to gain exposure to new crypto projects, hoping for higher returns.

A large number of pre-startup purchases, especially from large investors (whales), seem to be associated with the fear of missing out on a different investment (FOMO). This often leads to whales being bought at a relatively high price. According to Keyrock:

“The whales market tells a different story with a dramatic rally just days before the TGE. This increase? With buyers accounting for 80% of the market, it's likely fueled by a wave of FOMO.

Due to the resulting volatility, most pre-TGE markets are not profitable for buyers.

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Over 95% of ENA and PIXEL pre-token investors are green.

Despite the high initial volatility, more than 95% of pre-token investors in Athena Labs (ENA) token and idle game Pixels (PIXEL) token are currently profitable, indicating the potential of pre-TGE investment.

The ENA token is up 14% since its launch, while Pixel coin is down more than 31% since the token's launch, according to CoinMarketCap data.

However, other token launches have not gained as much traction. Pre-token investors who bought PORTAL experienced losses of more than 60%, down more than 82% since the token launched in late February.

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