Cryptocurrency derivatives exchange FTX is experiencing two great months.
The popular crypto derivatives exchange FTX is just a few months away. The price of the service token, FTT, has surged more than 130% in just six weeks according to CoinMarketCap data, after a flurry of advertisements.
- what’s he doing: FTT is the utility token of the FTX cryptocurrency exchange. It can be used to reduce exchange trading fees or act as collateral against futures positions. You can also bet to earn interest and have a chance to win NFTs.
- Management team: CEO Sam Bankman-Fried is an MIT alumnus who worked at Jane Street Capital before co-founding Alameda Research and FTX with Gary Wang. CTO Wang is a former software engineer at Google.
- Market value: $6.46 billion (CoinMarketCap, September 2, 2021).
- Availability: FTT is not available on any of the major cryptocurrency exchanges in the US.
FTX, Alameda Research, and Sam Bankman-Fried
Sam Bankman-Fried is something of a crypto superstar. The 29-year-old billionaire co-founded quantitative trading company Alameda Research with Gary Wang in 2017. The couple went on to launch FTX two years later. Bankman-Fried believes in effective altruism and a living life to maximize the good you can do in the world.
FTX offers crypto-derivative trading, including futures and options. Instead of traditional margin trading, which traders can use to multiply their gains or losses, FTX uses leveraged tokens. These allow clients to take a leveraged position without dealing with the complexities of full margin trading. Its US site, FTX.US, has a limited set of services due to restrictions on retail derivatives trading.
Derivatives are advanced trading products that involve trading contracts to buy or sell a product without necessarily owning the underlying product itself. It allows traders to speculate on whether the market will rise or fall.
FTX set out to solve a number of issues facing other derivatives exchanges, such as heavy trading, poor liquidity, and so-called “clawbacks.” Clawbacks are when money is taken from different investors to cover someone else’s bankruptcy.
Alameda Research is a quantitative trading company that manages more than $1 billion in digital assets.
One of the main reasons why FTT prices have risen lately is the big string of news we’ve seen, culminating in its recent acquisition of US derivatives firm LedgerX.
Here’s a quick summary of the latest FTX announcements.
- July 20: FTX closed a $900 million fundraising round, valuing the company at $18 billion. With several big names among the 60 investors who participated, FTX said this was one of the biggest increases for a crypto company.
- July 27: Launch of the FTX Climate Program, which will fund climate research and help FTX achieve its goal of becoming carbon neutral.
- August 5: Sponsorship deal with gaming startup Yield Guild Games. It awards FTX naming rights to a scholarship to help get 137 players from developing countries starting in Axie Infinity (AXS), a popular crypto game.
- August 10: Entrepreneur and cool Mr. Shark Tank, Kevin O’Leary, agrees to become a spokesperson for FTX as part of a long-term relationship. O’Leary praised FTX’s tough approach to compliance.
- August 13: FTX commits three years of funding to Brink Technology, a non-profit organization that provides grants and support to Bitcoin (BTC) developers.
- August 31: FTX has acquired LedgerX, a US-licensed derivatives firm that caters to both individual and institutional investors. The acquisition will help FTX bring crypto derivatives to its US customers.
Should you buy?
With so many cryptocurrencies to choose from, if you are investing for the long term, it is important to buy currencies with strong fundamentals and likely to do well over time. Even then, only invest money you can afford to lose, as the cryptocurrency market can be incredibly volatile and risky.
As an exchange, FTX appears to be in a position to perform well in the long run, which bodes well for FTT. She has a great team and a clear action plan outlining both the problems you want to solve and how you propose to tackle them. And unlike many cryptocurrencies, it has a straightforward use case.
Additionally, the recent LedgerX deal could help grow FTX.US’s product offering and differentiate it from the more established crypto exchanges in America. Currently, FTX is strong internationally, but its customer base in the United States is limited by restrictions on its product offerings.
However, as the US authorities consider how best to strengthen crypto exchange regulations, there is a good chance that all forms of derivatives trading will come under the microscope. Bankman-Fried believes that regulatory compliance is important and believes that crypto exchanges need to work with regulators, not against them.
Another problem is that FTT is not easy to buy in the US. In fact, according to the FTX website, US residents are not allowed to deal in FTT. While it may be possible to purchase an FTT from a decentralized exchange, trading unauthorized tokens carries additional risks.
If you are an international FTX customer, there are many benefits to owning an FTT, from reduced fees to the opportunity to earn interest on your property. if I were Not FTX client and they view FTT as an investment, and regulatory changes are the biggest threat to the token.
Stronger controls on crypto derivatives in the US and around the world could hamper FTX’s plans to gain a greater foothold in the US market and affect its business internationally. However, if FTX can work with regulators – as the company says it wants – the price could grow even more.
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