Key facts
- Crypto exchanges including Binance, Coinbase, and Hyperliquid are offering pre-IPO perpetual futures on SpaceX.
- These derivatives allow traders to speculate on SpaceX's future share price, referencing its latest disclosed pre-IPO valuation.
- Trading volume for SpaceX pre-IPO perps reached approximately $3.2 billion with $390 million in open interest from May 17 to Wednesday.
- Binance reported $2.1 billion in trading volume for its SpaceX perps in 18 days.
- Critics highlight the speculative nature, low liquidity, and lack of a direct peg to underlying assets for these derivatives.
- The price of SpaceX pre-IPO perps has fallen from above $200 to around $160 in less than a month.
Crypto exchanges are capitalizing on the anticipation of SpaceX's initial public offering by offering pre-IPO perpetual futures, allowing traders to speculate on the company's future share price. These derivatives, which have no direct link to the underlying shares and are priced based on SpaceX's latest disclosed pre-IPO valuation, have seen significant trading volume, with billions of dollars flowing into instruments like those offered on Binance, Coinbase, and Hyperliquid.
The popularity of these derivatives comes as global markets anticipate SpaceX's record-breaking IPO, potentially raising $75 billion. Data from Talos indicates approximately $3.2 billion in trading volume and $390 million in open interest for SpaceX pre-IPO perps between May 17 and Wednesday. Binance alone reported $2.1 billion in trading volume for its SpaceX perps in just 18 days.
These instruments, known as 'perps,' are commonly used in cryptocurrency markets for leveraged bets that roll over indefinitely. While typically offering high leverage, pre-IPO perps for equities are often capped at 3x to 5x. Critics, however, point to the speculative nature of these contracts, noting their low liquidity, high volatility, and the fact that they are not pegged to any underlying asset, unlike tokenized stocks. The price of SpaceX pre-IPO perps has already fallen from over $200 to around $160 in less than a month, while SpaceX shares are expected to price at $135.
The rise of these derivatives has intensified scrutiny from traditional financial institutions and regulators. News that U.S. regulators might approve perps for cryptocurrencies had previously impacted the shares of Intercontinental Exchange, the parent company of the New York Stock Exchange, due to concerns about long-term competition. The World Federation of Exchanges, an industry body for stock exchanges, is engaging with regulators to discuss the principles and robustness of price formation in these new instruments.
Experts caution investors to understand the risks involved. Alex Edmans, a professor at London Business School, noted that while investors might be drawn to the narratives of space exploration or crypto's potential, these do not necessarily reflect an asset's true worth. It remains unclear who is driving the trading volumes, with possibilities ranging from individual retail traders to proprietary trading desks of hedge funds.