Teun Kerkhof - 8 September 2021

FTX’ path to success

You may have heard of FTX as it now places itself among names like Huobi and Binance. Within a few years, the crypto exchange has worked its way up to become a big household name in the industry. In terms of volume it is ranked in the top 5 crypto exchanges. Furthermore, by making good strategic decisions, FTX has positioned itself very well on various key aspects in the crypto industry and has become more than just an exchange. 

In this post we go over how it started for FTX and talk about their current (and upcoming) products. To conclude, some of the latest acquisitions done by FTX are highlighted and we try to look ahead and speculate what the future holds for FTX.

About the exchange

FTX launched its operations in May, 2019.The CEO of FTX is Sam Bankman-Fried. He is also the founder of Alameda Research which he founded before starting FTX. Alameda Research is a quantitative trading firm focused on digital assets with over $1bln assets under management. Besides being very wealthy, SBF is very involved in the crypto industry. He is known for his involvement in the debacle surrounding Sushiswap. More on this story can be found here

The motto under which FTX operates is “for traders, by traders” as it strives to make the experience for traders the best possible. This translates in minimized latency, minimized latency, a wide variety in products, and more.  

Funding

On August 9th, 2019, FTX raised $8mln through Seed from Consensus Lab and others. Later that year, on the 20th of December, it had a Corporate Round with Binance for an undisclosed amount. In July of this year, FTX had a Series B round that resulted in a raise of $900 mln. Shortly after SBF announced they had bought back Binance’s shares in the company. The latest Series B ended up for FTX at a valuation of $18bln, while it was only $1.2bln a year ago.

Products

FTX offers its customers a wide variety of products. Starting with spot trading, a classic venue for traders to buy and sell cryptocurrencies or stocks on markets supported by FTX. According to Coingecko, FTX has 270 tokens available for trading across 435 different pairs. The stock offering by FTX differs from Binance, as FTX does have the correct licenses in possession that allows the platform to be a broker and able to offer stocks on their exchange. 

Another classic product is the futures market on FTX, currently the second highest in terms of volume and open interest. FTX offers perpetual contracts and regular futures on cryptocurrencies, tokenized stocks, and various crypto indexes. In total it has over 1100 tradable pairs. 

Furthermore, FTX offers leveraged tokens to its customers. Making it easier for traders to have leveraged exposure without having to manage a leveraged position. Currently there are 45 different leverage tokens. 

FTX also has volatility tokens coined Move Contracts. Users can trade a token based on the movement in either direction.

Then there are the FTX prediction markets. They were introduced in 2020 in anticipation of the US presidential elections. FTX customers were able to trade TRUMP and BIDEN tokens and speculate on who was going to win the elections. 

Last but not least, on the 6th of August SBF announced on his Twitter that NFTs are coming to FTX. On the upcoming marketplace anyone will be able to create and trade NFTs. He added that all NFTs will be cross-chain Ethereum and Solana. This makes FTX an incredible bridge for users to bring ETH NFTs on Solana where the fees are much lower. Currently, there is no news if the FTT token would play a role in the upcoming FTX NFT marketplace. If the NFT marketplace gains popularity it could attract a lot of volume from OpenSea (OS) that is currently leading the NFT hype. Last month OS experienced $3.4bln volume.

Token(s)

FTX has its own exchange token called FTT (FTX Token). In their words it is “the backbone of the FTX ecosystem”. Besides speculation, the token has utility in the form of fee rebates, staking, increased airdrop rewards, and more. There is a buy and burn system in place to remove FTT tokens from the market which happens on a weekly basis. 

FTX is also very involved in the Solana ecosystem. It started in July last year, FTX announced that they chose Solana as blockchain for their non-custodial decentralized derivatives exchange called Serum. This is no surprise, because FTX is backed by Alameda Research who also are huge stakeholders in the Solana ecosystem. FTX therefore has become the go-to exchange for the Solana ecosystem. The firm is a huge backer in the Solana ecosystem, here is a list of their investments and a lot are Solana tokens. 

Performance

Recently, FTX came out with a H1 review displaying some interesting numbers and facts. Here are some of the highlights, but you can find the full report here

  • Average daily volume of $10,965,000,000 (934% increase since January)
  • Over 1 million users sign-ups in the last 6 months.
  • Reduced latency by 50% and no down time during extreme volatile moments.
  • Valued at $18 bln.
  • Launched spot and future trading for GME, AMC, and BB.
  • Launched cross-chain (SOL<>ETH) NFT marketplace.


In the first graph below you can see the growth of FTX in terms of volume over the past year. The second growth displays the growth of FTX respective market shares. Their market share in Ethereum futures open interest, for example, grew from 10% to 20%.

Acquirements & partnerships

At the end of August last year, FTX acquired portfolio tracking app Blockfolio for $150 mln. The app was founded in 2014 and allows its users to be able to track their portfolio in detail. At the time of acquisition it had over 6 million downloads. Now FTX can leverage their experience in trading with Blockfolio’s product to bring more to the table for their users. Blockfolio became FTX: Blockfolio and this year the Blockfolio app was rebranded to FTX. It already was fully integrated with the FTX exchange, it was only Blockfolio’s name that was left. 

Almost exactly a year later, FTX announced their second acquisition: LedgerX. LedgerX is a derivatives exchange and clearinghouse regulated by the Commodity Futures Trading Commission (CFTC), offering futures and options on BTC and ETH. The acquisition gives FTX.US the ability to offer crypto derivatives to their US clients as soon as October. This sets FTX.US apart from other American spot exchanges such as Coinbase, Kraken, and Binance US, which currently don’t offer regulated crypto derivatives trading in the US. 

Besides these huge acquisitions there are also other notable deals. The renaming of the Miami Heat home stadium to the FTX Arena for example. The deal lasts for 19 years up until 2040. FTX is also the official cryptocurrency exchange partner of Major League Baseball. Not only in traditional sports has FTX a presence, the exchange also has acquired an esports team: TSM FTX. Expanding their presence even more into the realms gaming and gaming-entertainment. 

Conclusion

In just a few years FTX has grown from a small crypto exchange to a monolithic company in the crypto industry. Through strategic investments and decisions FTX has worked its way up to become one of the most popular crypto exchanges on the market. The exchange has achieved this by staying true to their motto: “For traders, by traders”. In the past, they have listened to the needs and desires of their customers and introduced various new products and optimized the experience on the exchange. Examples are the latency improvements, the launch of GME as tokenized stock during the Wallstreets Bets mania, the innovative pre-IPO Coinbase contract, and more recently the cross-chain NFT marketplace. With these commitments FTX sets itself on the forefront of innovation for traders and has become a household name in the crypto industry. These developments by FTX lead to a growth in users and could ultimately lead to a growth in demand for FTT. With their recent acquisitions FTX has positioned itself well on various venues, it will be interesting to see how FTX continues this growth. 

Furthermore, the involvement of FTX and Alameda Research in the Solana ecosystem is also one not to be underestimated. The money and influence these two companies have, validates and also backs up Solana. Furthermore, with FTX as centralized exchange on its side the Solana ecosystem has a great chance to be adopted by crypto users.