In December 2019, the world’s largest cryptocurrency exchange Binance invested a huge sum of money in FTX, causing the crypto sphere to put the spotlight on the new exchange site. Two years later, FTX played an important role in the controversial GameStop rally last January when it listed GME in its portfolio, therefore boosting its price. What is this newsworthy exchange and what makes it different from the rest? Find out below here at BTC Post!
What is FTX?
FTX is a cryptocurrency exchange site that allows crypto derivatives trading aside from the spot and leverage trading options usually offered at most crypto exchanges available today. It’s the first of its kind, making FTX a trailblazer spearheaded by Sam Bankman-Fried. Before launching FTX, Bankman-Fried first founded Alameda Research, a liquidity provider and asset manager responsible for 30% of the trading volume in major exchanges.
Branded as a ‘cryptocurrency exchange built by traders, for traders’, FTX launched in 2019 with an impressive team of crypto trading professionals at its helm. It offers various crypto investment options that were once only available to traditional markets. These include derivatives, options, volatility products and leveraged tokens.
FTX’s innovative exchange platform combines the best of crypto exchange sites and traditional investing tools. With their advanced platform, traders from conventional exchanges can buy and sell novel crypto assets and digitized stocks. Crypto traders, on the other hand, can apply traditional tools and financial instruments in the crypto context to gain more profits from their digital investments.
Trading services that FTX offers
Futures trading bets on whether the future price of an asset will go up or down. In FTX, you can trade BTC, ETH, EOS and other coins in over 150 perpetual and quarterly futures markets.
Three types of futures contracts are available for coins listed in FTX:
- A futures contract that expires on the present quarter
- A futures contract that expires on the following quarter
- A perpetual futures contract that does not expire.
FTX also offers spot trading which is the most common trading method available in most exchange sites today. This kind of trading matches buy and sell orders on the ‘spot’, allowing traders to instantly generate profits.
This feature allows crypto traders to also invest in traditional assets usually traded in conventional exchanges such as Tesla, Amazon and Netflix to name a few.
When FTX listed GME in January, it became a tokenized stock that was available for crypto investors. At the time, this exposure drove GME’s price even higher.
By listing tokenized stocks, FTX widens the possibilities for crypto traders, allowing them to expand their portfolio into other asset classes.
FTX offers leveraged tokens for trading with up to 101x leverage. To safeguard your position, the default leverage is set at 10x. You can find three classifications of leveraged tokens in FTX:
- HEDGE – Leveraged tokens with 1x leverage; if the underlying asset moves x%, the corresponding HEDGE token moves in the same percentage
- HALF – Leveraged tokens with 0.5x long leverage; if the underlying asset goes up by 4%, the corresponding HALF token moves up by 2%
- BULL or BEAR – Leveraged ERC20 tokens with 3x leverage; all coins have corresponding BULL and BEAR tokens
- If the underlying asset goes up by x%, its corresponding BULL token increases by 3x and the BEAR token drops by the same percentage.
FTX offers two kinds of volatility products: BVOL and MOVE contracts. BVOL tokens are ERC20 tokens that track the volatility of certain crypto markets. It has two types, BVOL that is 1x long for the implied volatility and iBVOL that is 1x short of the implied volatility.
MOVE contracts, on the other hand, are like futures contracts but instead of expiring on certain dates, they expire once the price moves to the set amount.
There are three types of MOVE contracts available at FTX exchange:
- Daily MOVE contracts – Follows the price of BTC and expires over a single day’s period
- Weekly MOVE contracts – Follows the price of BTC and expires over a 7-day period
- Quarterly MOVE contracts – Follows the price of BTC and expires over a roughly 3-month period
FTX’s prediction markets allow traders to speculate on the outcome of real-world events such as Trump’s impeachment and the Olympics in 2021. There are only a few markets under this feature but it’s a novel idea that’s not offered on most exchange sites.
Diving into the technicalities of FTX
Native coin, FTT
Similar to Binance’s BNB coin, FTX also has its own native coin called ‘FTT’ which grants exclusive privileges to its users. These include a cut on the trading fees, socialized gains from the offered insurance fund and using it as collateral for futures trading.
FTX exists by itself and can also be traded on the trading platform’s Spot and Futures markets. It’s also available for trading in Binance.
FTX follows a tiered structure when it comes to trading fees. The higher the trading volume, the higher the tier and the lower the fees. The first tier has a maker fee of 0.02% and a taker fee of 0.07%. The sixth and highest tier has a maker fee of 0.01% and a taker fee of 0.04%. Compared to most crypto exchange sites, FTX’s fees are relatively low and inconsequential.
The team behind FTX
What makes FTX such an appealing firm despite its novelty is the group of highly experienced trading experts leading it. They came from respectable tech and financial firms such as Facebook and Google prior to founding FTX, solidifying their knowledge and background in the trading field.
Sam Bankman-Fried – CEO and Founder
CEO and founder Sam Bankman-Fried worked in Jane Street Capital’s international ETF desk where he traded all sorts of financial instruments such as a variety of ETFs, futures, currencies and equities. He is the one who designed the company’s over-the-counter trading system.
Gary Wang – CTO and Founder
The company’s CTO and founder Gary Wang worked as a software engineer in Google before prioritizing FTX. He is responsible for the systems that aggregate prices across millions of flights.
Nishad Singh – Head of Engineering
Before working at FTX as the head of engineering, Nishad Singh worked at Facebook as a software engineer. He is a graduate of the University of California Berkeley, holding a bachelor degree in Electrical Engineering and Computer Science.
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