FTT: The Token Behind FTX
FTT is a native Ethereum-based utility token of the popular cryptocurrency exchange, FTX. The key to the rise of FTT, therefore, is intrinsically tied to the success of its platform. With the strong management and funding fuelling FTX, the increased public exposure in sports and e-sports, the potential untapped growth with the US via LedgerX, and the potential launch of FTT on Coinbase, it seems likely that there is still much more upside to go for FTT. It has started at around $5 at the start of 2021 and is now trading at approximately $55. To understand why it has risen in value so fast, and why it may still be a lucrative investment, we need to understand the following.
The Most Prominent Co-founder Behind FTX: Sam Bankman-Fried
The FTX team consists of veterans that have worked in Wall Street and big tech firms such as Google, Facebook and Optiver. The most prominent co-founder behind FTX is Sam Bankman-Fried. Sam Bankman-Fried is a physics major from the Massachusetts Institute of Technology who started his career as a trader in one of the top global proprietary trading firms, Jane Street. He then went on to launch a crypto quant trading firm called Alameda Research in 2017, with a fund reaching $100 million at its height and earning $20 million per day by exploiting the kimchi premium as well as arbitrage between the US and Japanese bitcoin markets. In 2019, Sam launched the cryptocurrency derivatives exchange, FTX, an exchange that supports both retail and institutional traders. As it stands, Sam is the current head of three organisations: Alameda, FTX, and Serum, a decentralized exchange spun out of FTX.
What Makes FTX Different?
- FTX is geared towards serious traders
The majority of FTX’ trading volume stems from institutional investors. The average active retail customer trades approximately $3 million per month, translating to $337 in revenue, while active institutions average $439 million in monthly volume, contributing $23,000 in revenue. Its solid trading features include low fees, tight spread, extensive customer support, TradingView charts, and IOS and Android mobile apps. To this effect, FTX is deemed as one of the most reliable exchanges for serious traders. Indeed, it employs a multi-step liquidation process to prevent clawbacks. The exchange first attempts to close the liquidated position, and when it cannot, it will use backstop liquidity providers to auto-close the position. The final backup process is to close the remaining size against users with large opposing positions and cover any losses out of the insurance fund.
2. FTX has a unique set of services and product offerings
FTX allows cross-margining and flexible collateralization. This means that the collateral for a leveraged trade does not need to be the same asset as the asset underlying the trade. This makes trading less of a hassle because investors do not need to go through the trouble of converting one asset to another and do not need to make separate funds.
FTX offers high leverage products and tokens. The exchange currently offers 20x maximum leverage, down from its previous 101x leverage products. This is still one of the highest maximum leverage a crypto exchange offers when compared to FTX’s other competitors. Leveraged long and short tokens for BTC, ETH, MATIC, and others are also offered by the exchange; for example, the ETHBULL token allows investors to trade a 3x long position in Ethereum.
FTX offers tokenized stocks. These spot tokens are backed by a share of public stock custodied by CM-equity, a fully regulated financial institution in Germany.
Usages of FTT
Owners of FTT tokens receive many favourable benefits on their home platform. For one, FTT stakers are granted a trading fee discount on FTX. They also enjoy increased rebate rates (earning a higher fraction of their referee’s fees), bonus votes in FTX’s polls (its current poll involves deciding which project to denote 1% of its fees to), increased airdrop rewards, waived ERC20 and ETH withdrawal fees, and tickets to IEOS hosted on FTX. FTT tokens may be used as collateral for futures trading, and FTT holders will profit from the FTX backup liquidity fund should big market fluctuations occur in the crypto market.
The total supply of FTT will be limited: one-third of transaction fees generated from FTT purchases will be utilized to repurchase and burn FTT tokens. This will continue until 50% of all created FTT have been burned.
FTX Is Ramping up Its Marketing Efforts
FTX has been increasing its marketing efforts, noticeably in the professional sports and e-sports industry. In May this year, FTX secured naming rights for a major US professional sports venue Miami Heat Arena for $135 million. Similarly, FTX entered a $210 million ten-year partnership with US esports organisation Team SoloMid (TSM), with ‘industry-leading initiatives such as expansion into mobile platforms, and investment into esports and gaming. Other sponsorships include the Major League Basketball, where umpire uniform sleeves will have the FTX.US logo during games, and a 7- year sponsorship with the League of Legends. Additionally, NFL quarterback Tom Brady and supermodel Gisele Bundchen have an equity stake in FTX and are serving as the firm’s environment and social initiatives advisors. They most recently starred in an endorsement campaign for FTX, the first in a series of long-form videos aimed to bring cryptocurrency and FTX to the masses.
• More than 60 investors participated in the most recent funding round for FTX Trading Ltd. In July 2021, FTX raised $900 million at an $18 billion valuation. Investors included Sequoia Capital, SoftBank Group, and Coinbase Ventures.
• Revenue has increased over ten-fold in 2021 alone while revenues increased 75 times since its Series A funding in mid-2020.
• On August 31, FTX.US announced that it was acquiring LedgerX, a CFTC regulated designated contract market, swap execution facility and derivatives clearing organisation. The acquisition means it is the only exchange in the US offering both futures and spot crypto trading, a unique feature that could be leveraged as a competitive advantage.