Author: On Chain Times

Translated by: Shen Chao TechFlow

Shen Chao's Introduction: Before Anthropic's listing, there was a valuation discrepancy of up to 150 billion dollars between contracts across four trading platforms, with the executable arbitrage spread between the two most active markets exceeding 800 basis points at one point. If you are following the secondary market pricing of AI unicorns, this article provides the most comprehensive liquidity, slippage, and funding rate data currently available.

Introduction

In the past week, following Dario and Anthropic's publication of "We Must Take Control of the Frontier," there has been significant volatility in the Pre-IPO market. Below is a brief analysis of various Pre-IPO trading venues, covering price, trading volume, liquidity, and spreads.

Price and Trading Volume

The chart below shows the 1-minute mid-price trend of Anthropic Pre-IPO perpetual contract $ANTH on Variational, QFEX, Lighter, and Entropy from September 9 to 15.

It is clear at a glance that traders on each platform have not reached a consensus on the true value of Anthropic. On September 10, the implied valuation of Anthropic on Entropy and Lighter was about 150 billion dollars higher than that on Variational and QFEX. Although this spread narrowed over the weekend, it then widened significantly again.

As shown in the chart below, the Pre-IPO market began to sell off hours after the release of "We Must Take Control of the Frontier" and the supportive responses from Elon and Sam Altman. From the article's release to the low point on Sunday, the four perpetual contracts averaged a decline of 4.95%, with Entropy experiencing the largest drop of 5.54%.

Thanks to Carlisle for the inspiration for the above chart.

The Pre-IPO index on Variational aggregates external venues where the $ANTH contract is live, such as Binance Futures. Considering that the mid-prices of $ANTH on QFEX and Variational were almost entirely consistent during this 7-day window (the median difference was only a few cents), market makers on QFEX were almost certainly quoting around the same external reference price (likely Binance Futures).

During this 7-day period, Entropy accounted for the majority of trading activity, with $ANTH trading at 53.2 million dollars and $OAI trading at 23.5 million dollars:

Execution Costs

The chart below shows the average expected slippage on both sides of the order book for a $100,000 market order. QFEX had the lowest expected slippage, with a median cost of 10.6 basis points, while Entropy was at 36.3 basis points, Variational at 69.5 basis points, and Lighter at a staggering 288.2 basis points.

It must be acknowledged that this does not fully reflect the actual execution costs when placing orders. Variational's execution quotes are updated approximately every 10 seconds, and both Entropy and QFEX also have trading fees (although both are in growth mode, with Entropy’s market order fee at 0.9 basis points and QFEX at 1.5 basis points). Additionally, some exchanges have order cancellation priority, which means market makers can withdraw quotes before an order is executed, potentially worsening actual execution conditions. Finally, both Lighter and Hyperliquid enhance market order delays through account levels and priority fees, which should also be considered.

The chart below is a similar analysis of a $1,000 market order, with Lighter excluded due to excessive slippage compared to other venues. Similarly, QFEX had the narrowest spread, followed by Entropy and then Variational.

Spread Arbitrage

As mentioned earlier, $ANTH has shown a significant premium on Entropy and Lighter compared to Variational and QFEX, and this remains the case as of the time of writing. Observing the two venues with the best liquidity during this period (QFEX and Entropy), the spread oscillated between approximately 150 and 800 basis points. The chart below illustrates the "executable" spread when shorting high-priced contracts and going long on low-priced contracts, looking specifically at the best bid price on Entropy and the best ask price on QFEX.

The trading price of $ANTH on Entropy is about 3.5% higher than on QFEX, swinging several percentage points daily. As this is a Pre-IPO market, there is no real price for Anthropic. While you might expect these markets to gradually converge before Anthropic's actual IPO, the spread may significantly widen during this period.

From September 9 to 15, the cumulative net funding rate on QFEX was +1.12 basis points (0.0012), while on Entropy it was -41 basis points (-0.0041). If you enter this spread and wait for it to converge before the IPO, rather than entering and exiting based on your own judgment of the spread level, a significant portion of the expected profit may be eaten away by funding rate costs.

Understanding the specific Pre-IPO design of the venues you are trading is crucial, especially when you are trying to arbitrage the spreads between them. For example, Entropy adopts a market capitalization methodology, fixing the total equity at 1 billion shares, while QFEX will reprice the perpetual contracts after the total equity information for $ANTH is announced (assuming deviation from 1 billion shares exceeds 3%), similar to a stock split operation.

There are various ways to attempt trading spreads in these Pre-IPO markets, including replacing one leg with stocks that are highly correlated with these Pre-IPO perpetual contracts. More content will be elaborated in subsequent articles.