Crypto Exchange FTX Valuation Jumps to $32B After Latest Fundraise

Cryptocurrency exchange FTX has raised $400 million in a Series C fundraise, helping bump up the company's valuation to $32 billion. It was valued at $25 billion when it raised upwards of $420 million from investors in October 2021.  

Several notable venture and institutional firms participated in the funding round including Temasek, Softbank Vision Fund 2, Ontario Teachers' Pension Plan, and Tiger Global. FTX's U.S. arm raised $400 million at a valuation of $8 billion last week from many of the same investors.

FTX CEO Sam Bankman-Fried told Bloomberg that the company plans to spend on mergers and acquisitions (M&A). "There are a number of businesses that we think might be synergistic with ours," he said. FTX has already spent about $1 billion on acquisitions and, according to Bankman-Fried, may be interested in payments businesses, non-fungible token (NFT) firms, and the metaverse. He said that potential targets might be interested in getting acquired due to the challenging environment for funding. FTX already has a $2 billion war chest for venture funding.

FTX's fundraise has occurred during a fraught time in crypto markets. After setting new records during the pandemic, cryptocurrency prices have crashed since the beginning of this year. The drawdown in cryptocurrency markets has raised fears of a prolonged crypto winter, similar to the one that engulfed cryptocurrency markets in 2018 and 2019.

But Bankman-Fried doesn't expect an extended price decline in cryptocurrency prices. "I think we're not entering a long-term crypto winter," he told CNBC, adding that news regarding interest rate changes has been moving markets "more generally as well."

What Is FTX? 

Even in the fast-moving world of cryptocurrencies, where coins and exchanges can go from boom to bust in days or months, FTX stands out for its growth. The exchange was started less than three years ago by two MIT grads and has quickly risen to become the world's third-biggest cryptocurrency exchange by trading volume based on data from crypto aggregation site Coinmarketcap. Unlike other crypto exchanges focused on drawing retail consumers to their outfits, FTX caters to a more sophisticated trader by focusing its operations on derivatives trading.

The strategy seems to have paid off. The exchange weathered the crests and troughs of crypto volatility to grow at breakneck speed and report profits at the same time. The company is already "net profitable," Bankman-Fried told Bloomberg. In 2020, FTX made $85 million in revenues and was "on track" to report $800 million in profits for 2021 amid a surge in the prices of major cryptocurrencies. FTX U.S., which is a separate entity from the main company, had average daily volume of $360 million in the third quarter of 2021 and reported 1 million users. The daily trading volume for FTX itself is $14 billion. In an interview, Bankman-Fried said the exchange's frenetic growth happened because it was "responsive" to customers and regulators.

FTX started operations in Hong Kong but shifted its headquarters to The Bahamas last year. It offers trading in 100 crypto pairs and plans to expand its portfolio of products in the next one or two years, according to Bankman-Fried. To that end, it is acquiring trading licenses across the world. The company's U.S. unit already possesses licensing for derivatives trading in the United States, and its international unit will be licensed in "the bulk of the Western world" by the end of this year, Bankman-Fried told CNBC.  

In addition to generating headlines, FTX has also launched a public relations blitz in the United States by purchasing naming rights to coveted venues, such as the Miami Heat's arena, and signing up superstars like Tom Brady (who owns a stake in the company) and Stephen Curry to promote its products. "We've been focusing on trying to communicate with the world [about] who we are," explained Bankman-Fried.