FTX is a cryptocurrency derivatives exchange backed by Alameda Research, a quant trading firm and crypto liquidity provider.
The exchange launched in April 2019 and offered the usual spot trading, inverse swaps and futures contracts found on other major platforms. In early 2020, the exchange launched its daily and weekly binary BTC options markets.
FTT is the exchange’s native token and is issued on the Ethereum blockchain. FTT strikers get a discount on trading fees based on a tiered system and other benefits include bonus votes in their polls and increased airdrop rewards.
The first airdrop took place in August 2020, when 500 million Serum (SRM) Tokens were distributed to FTT holders. To differentiate itself from competitors, the users’ collateral is shared in one universal stablecoin wallet.
This means that traders can drastically lower their margin requirements. Numerous leveraged tokens that mimic leveraged ETF stocks have also been listed, including 3x Long Bitcoin and 3x Short Litecoin.
Leveraged Tokens are derived from the exchange’s perpetual swap contracts and act as tradable ERC-20 tokens that can be withdrawn and traded. These innovative products have made the FTX a popular exchange among investors, as evidenced by the rising interest rate outstanding on futures contracts.
As shown above, the figure is up 340% in the last six months, crossing the $ 2 billion mark, far outperforming the more established exchanges.
In November 2020, the exchange ventured into tokenized equity trading, although not available to its US citizens. Its partner CM-Equity keeps the tokens that can be exchanged for the underlying shares. Interestingly, it allows its users to buy less than one share, which is especially useful for high-end stocks like Amazon ($ AMZN) and Google ($ GOOG).
In December, FTX continued to innovate by launching pre-IPO futures contracts for AirBNB and Coinbase. These contracts allow traders to speculate at what price those companies will be quoted on an exchange. The exchange also offers trading for thematic products, including one basket of cannabis-related listed stocks.
By creating multiple markets with sufficient liquidity thanks to the market making structure, the exchange was able to attract the attention of a new customer base. More recently, a The Wall Street Bets index was launched, including GameStop ($ GME), Dogecoin (DOGE), and iShares Silver Trust ($ SLV).
Backed by this popular offering, the FTX Token (FTT) price has doubled since early 2021.
To further boost ownership of the token, FTX buys back and burns 33% of all fees generated by the exchange and 10% of the insurance fund’s net additions. This process will continue until half of the initial 350 million stock has been destroyed.
While this may seem like a deflationary schedule, 31.25 million tokens have been allocated to the team, which equates to at least 17.8% of the targeted 175 million circulating supply. Regardless, given the current token price of $ 11.70, the market capitalization upon completion of the combustion process will surpass $ 2 billion.
This number represents a 45% discount on Binance Coin (BNB) expected market cap in 2031, according to data from Messari. This is also roughly consistent with the stock exchanges’ total open interest spread of $ 4.26 billion to $ 2.0 billion.
Interestingly, Binance has an undisclosed investment in FTX, and this could lead to fewer incentives for direct competition.
Currently, it appears that the market is pricing both tokens at the same valuation. Binance appears to be expanding its ecosystem through its Binance Smart Chain decentralized exchange, their incubator for blockchain projects, and a successful token launchpad platform.
FTX, on the other hand, aims to be the market leader in the innovation of derivatives products.
Currently all of these projects are producing value for token holders and with the burn schedule and rising popularity among derivatives exchanges it is possible that FTT will continue to see further price increases.
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