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On the FTX derivatives market, the “Coinbase pre-IPO contract” has seen extreme uncertainty.
Investors with tokenized exposure to Coinbase (COIN) shares saw their stakes plunge in value in a matter of minutes on Tuesday.
The selloff occurred on FTX, a leading derivatives market, where the COIN-USD stablecoin exchange rate dropped from a high above $640 to about $420. According to a screenshot from Bloomberg podcaster Joe Weisenthal, three large red candles illuminated the selloff.
— Joe Weisenthal (@TheStalwart) April 14, 2021
Tokenized Coinbase shares were priced at $445 on FTX at the time of publication. Despite the excessive instability, the tokenized securities were priced far higher than COIN’s Nasdaq reference price of $250 prior to the direct listing.
On Tuesday, FTX joined Binance in listing Coinbase stock tokens ahead of COIN’s Nasdaq debut. The FTX listing, described as a “pre-IPO contract,” “tracks Coinbase’s market cap divided by 261,300,000.”
The exchange explained:
“CBSE balances will convert into the equivalent amount of Coinbase Fractional Stock tokens at the end of Coinbase’s first public trading day.”
Tokenized securities are fictitious representations of real-world equities. Tokenized stocks are spot tokens on FTX and can also be used as collateral for futures trading.
The Coinbase public offering, which took the form of a direct listing rather than an IPO, has been dubbed a “watershed” moment by the cryptocurrency group. The listing provides conventional investors with easy access to the blockchain industry without the need to buy digital securities, which are far more volatile than stocks.