What Is FTX Exchange?
FTX Exchange is a leading centralized cryptocurrency exchange specializing in derivatives and leveraged products. Founded in 2018 by MIT graduate and former Jane Street Capital international exchange-traded funds trader Sam Bankman-Fried, FTX offers a range of trading products, including derivatives, options, volatility products, and leveraged tokens. It also provides spot markets in over 300 cryptocurrency trading pairs such as BTC/USDT, ETH/USDT, XRP/USDT, and its native token FTT/USDT.
Bahamas-based FTX and its FTX US affiliate have overlapping management teams but separate capital structures. U.S. residents can only trade through FTX US.
- FTX is a centralized cryptocurrency exchange specializing in derivatives and leveraged products. It supports most commonly traded cryptocurrencies.
- FTX's key product offerings include futures, leveraged tokens, options, MOVE contracts, and spot markets.
- FTX is based in the Bahamas and does not serve U.S. residents, who can trade on FTX US instead.
- FTX and FTX US are affiliates with overlapping management teams but separate capital structures.
- FTX supports trading of over 300 different coins and tokens, though FTX US has substantially less offerings.
Basics of FTX Exchange
FTX's wide range of products and easy-to-use desktop and mobile trading apps draw crypto investors of all skill levels, from beginners to seasoned professionals or, in crypto jargon, from newbies to whales. The FTX platform offers a comprehensive range of order types, from basic market orders to more complex trailing stop orders.
FTX supports nine fiat currencies that investors can deposit and withdraw via a wire transfer: the U.S. dollar, euro, British pound, Australian dollar, Canadian dollar, Swiss franc, Brazilian real, Ghanaian cedi and Argentinian peso. The Turkish lira and Japanese yen also have restricted usage, with the Hong Kong dollar, Singapore dollar, and South African rand having functionality soon.
FTX US customers must verify their identities to qualify for full access under know your customer (KYC) rules. KYC Tier 1 customers are limited to single deposits of $2,999, ACH deposits of $500 for any rolling 10-day period, and a lifetime limit on withdrawals of $300,000. KYC Tier 2 customers are limited to single deposits of $20,000, ACH deposits of up to $30,000 per 10-day rolling period, and are not subject to daily or lifetime withdrawal limits.
FTX Key Products
FTX's key products include futures, leveraged tokens, options, MOVE, and spot markets.
Futures: Traders can take both long and short bets on leading cryptocurrencies using over 100 quarterly and perpetual futures pairs with margins of up to 101x. Stablecoins, such as USD and tether (USDT), are used as collateral to open and maintain positions.
Leveraged Tokens: FTX offers ERC20-based tokens that provide traders up to 3X leveraged exposure against the underlying trading pair. For instance, if a trader opens a BULL/USD - 3x long Bitcoin token and Bitcoin rallies 10% from the time of purchase, the leveraged token would gain 30%. FTX's leveraged tokens have no margin requirement.
Options: Traders can speculate on future price direction and hedge against their open positions with a range of call and put options that give the holder the right but not the obligation to buy or sell at a future strike price.
MOVE: These contracts allow traders to bet how far the price of a cryptocurrency will move over a time period, irrespective of the direction, essentially making them a play on volatility. As long as the price of the underlying cryptocurrency moves over a specific dollar amount—either up or down—the contract generates a profit.
FTX US offers nearly 60 cryptocurrency and currency spot trading pairs, along with options contracts denominated in 0.01 Bitcoin and 0.1 Ether, cryptocurrency swaps, and Bitcoin mini futures. It also operates a marketplace for non-fungible tokens.
FTX offers futures pairs with margins up to 101x to long or short leading cryptocurrencies, allowing traders to take advantage of comparatively small price movements.
FTX is incorporated in Antigua and Barbuda and headquartered in the Bahamas after moving from Hong Kong in September 2021. Its FTX Digital Markets Ltd. unit is regulated by the Securities Commission of the Bahamas. The exchange does not offer services to U.S. residents.
U.S.-based crypto traders can access FTX US—a registered money services business with FinCEN. In October 2021 FTX US completed its acquisition of LedgerX, rebranding it as FTX US Derivatives. FTX US Derivatives is licensed as Derivatives Clearing Organization, Swap Execution Facility and Designated Contract Market by the U.S. Commodity Futures Trading Commission (CFTC).
FTX competitive futures and spot markets trading fees ranged from 0.04% to 0.07% for market takers, based on the maker and taker model, as of September 2022. Meanwhile, leveraged tokens carried a creation and redemption fee of 0.10% and a daily management fee of 0.03%.
FTX doesn't charge deposit or withdrawal fees for most crypto assets. All bitcoin withdrawals greater than 0.01 bitcoin are free, as is one withdrawal of less than 0.01 bitcoin per day. Additional small bitcoin withdrawals are charged a 0.1% fee. Fiat currency withdrawals valued at more than $5,000 USD are free, as is one withdrawal per week below that amount.
FTX US trading fees for market takers ranged from 0.05% to 0.2% as of September 2022. Fiat currency deposits can be made via wire transfer, ACH, debit or credit card, and Silvergate Exchange Network, all of which (except for debit and credit cards) can be used to withdraw fiat currency. Wire transfer withdrawals over $5000 USD are free. One withdrawal per week below that amount is also free, but subsequent wires incur a $25 fee. There are no deposit fees for blockchain transfers. FTX US pays the withdrawal blockchain fees for all tokens except ERC20/ETH and small bitcoin withdrawals.
Non-fungible token (NFT) fees may vary depending on the platform and location of the trade. For FTX US users, it costs $1 to list an NFT using its self-service tool and 2% charged to the seller from each sale or trade. Alternatively, FTX (the non-US platform) charges 5% fees to the buyer and seller on each side of the trade.
FTX boasts risk management features across three primary areas: personal accounts, exchanges, and other security areas.
Personal Account Security
To register an FTX account, the company requires a combination that adheres to complex character requirements. In addition, it scans password requests for predictable patterns; any account not being compliant is not allowed to register.
In addition, FTX requires users to set up two-factor authentication (2FA). 2FA is required for all withdrawals. In addition, FTX locks withdrawals for an account should an account remove 2FA contact information or if the account's password is changed.
FTX monitors and tracks user activity for suspicious behavior. Should FTX see an unusual login attempt, FTX will notify the owner of the account for further verification to be successfully logged in.
FTX contracts with Chainanalysis to identify potentially suspicious trading activity. Chainanalysis is a real-time, anti-money laundering compliance solution that monitors for large deposits or unusual activity.
FTX also manages a FTX Backstop Liquidity Fund to ensure liquid assets are on hand to facilitate trading. As of September 2022, FTX's liquidity fund balance was approximately $200 million.
Other Security Features
FTX allows users to create custom logins through the use of subaccounts. Subaccounts allow multiple people to access the same account; however, each user will have configurable and customizable levels of permission. Each log-in can be designated as read-only (cannnot make any trades but can view historical activity). In addition, different logins can have varying degrees of withdraw capabilities.
FTX also allows users to define security permissions regarding internet protocols (IPs) or wallet addresses. This ensures that only specified internet addresses or wallets can transact in relation to a specific account.
Management and Capital Structures
FTX and FTX US have overlapping management teams. Both companies list Sam Bankman-Fried as chief executive officer and co-founder Gary Wang as chief technology officer.
FTX closed a $400 million series C venture capital funding round in January 2022 valuing the company at $32 billion. Participating investors included Temasek, Paradigm, Ontario Teachers' Pension Plan Board, NEA, IVP, SoftBank Vision Fund 2, Lightspeed Venture Partners, Steadview Capital, Tiger Global, and Insight Partners. All investors involved in that funding round simultaneously participated in a series A funding round for FTX US valuing that company at $8 billion.
FTX Exchange is not regulated in the United States. U.S.-based traders can only access partner entity FTX US.
As part of their marketing efforts, the parent companies of FTX and FTX US in September 2021 signed Golden State Warriors point guard Stephen Curry to a long-term promotional partnership, providing the NBA star an equity stake in FTX.
In August 2021, the same companies announced a long-term promotional partnership with venture capitalist and television personality Kevin O'Leary providing the "Shark Tank" host equity stakes in FTX and FTX US along with pay in cryptocurrency.
Per FTX's website, the company "is proud to partner with the world's most exciting teams, properties, and heroes of their trade to amplify crypto education, involvement, and community impact". As of September 2022, additional partnerships included Major League Baseball, FTX Arena and the Miami Heat, Shaquille O'Neal, and FTX Field (University of California-Berkeley).
Pros and Cons of FTX Exchange
Advantages of FTX Exchange
FTX offers reasonable trading fees compared to other cryptocurrency exchanges. The exchange also boasts its mobile app, advanced trading opportunities, and trading opportunities for hundreds of different coins or tokens.
FTX also has several incentives as part of its VIP Program based on exchange volume. For example, entities classified as VIP 1 (with a total volume of 0.1% of exchange volume) have taker fees of 0.0375%. This may improve to VIP7 (with a total volume of 2.5% of exchange volume) which reduces taker fees to 0.025%. A similar tier system exists for market makers.
In addition, there are further benefits when these entities hold FTT. Holding $10,000 worth of FTT yields a 15% discount on fees, while holding $100,000 of FTT yields a discount of 25%.
FTX offers users a unique affiliate link. When new users sign up using that affiliate link, the referring user receives between 25% and 40% of the new user's fees depending on the amount of FTT staked. In addition, they will get 5% of their fees back. FTX also reserves the right to reward users with additional compensation based on the number of referrals, volume generated by users, or other criteria.
Disadvantages of FTX Exchange
There are several potential downsides to the exchange. FTX encourages its users to ask for help using support tickets; for those preferring more direct contact such as live chat support, other exchanges may be more suitable. In addition, the FTX global platform can not be used by U.S. residents. Instead, residents of the U.S. must use FTX US for regulatory reasons.
Though FTX offers a great range of trading products, some beginners in the space may find the interface or options overwhelming. FTX is often considered a leading option for more experienced traders, while it may be less suitable for beginners. Though FTX boasts low trading fees, there are often lower fees to be had on other exchanges.
Boasts hundreds of cryptocurrencies available for trading or exchanging on the full FTX platform
Has a VIP incentive program for reduces fees in a tiered system; fees are also further reduced by amount of FTT staked
Allows users to receive affiliate link to distribute to receive a portion of user fees that sign up using the link
Offers among the most robust suite of services for most advancing trading
Lack of customer support options, including no live chat feature
Can not be used by United States consumers; U.S. residents must instead us the alternative FTX US platform
Has considerably less available tokens on the FTX US platform
Does not have the lowest transaction fees
May have an overwhelming interface for beginning traders not familiar with derivates or technical graphs
What Does FTX Do?
FTX is a cryptocurrency exchange that promotes the liquidity and transacting of coins and tokens. FTX allows users to connect their wallets, place trades, exchange digital currencies, enter into derivative contracts, or buy/sell NFTs.
Why Is FTX Not Allowed in the United States?
FTX does not permit residents of the United States to trade on its platform. This is in response to strict regulation for the cryptocurrency industry. Most recently, in August 2022, the FDIC served FTX US a cease and desist letter to FTX citing the company potentially having made false and misleading statements in violation of the FDIC Act.
Is FTX Crypto Safe?
Many crypto-enthusiasts will boast that FTX is safe. In addition, there have been no known public breaches or hacks of FTX. However, as is the case with many centralized exchanges, cryptocurrencies are most safe when stored in cold wallets where users retain sole ownership of their private keys.
The Bottom Line
FTX is a widely-known and heavily-used cryptocurrency exchange allowing users to buy, sell, and enter into derivative contracts for coins and tokens. FTX also promotes transactions for NFT and collectibles. Though not available to U.S. residents due to cryptocurrency regulation, the company provides an opportunity for traders around the world to exchange hundreds of digital currencies for relatively low fees.