FTX is a cryptocurrency derivatives exchange supported by a quantitative trading company and cryptocurrency liquidity provider Alameda Research.
The exchange was launched in April 2019 and offers regular spot transactions, reverse swaps and futures contracts that can be found on other major platforms. By the beginning of 2020, the exchange has launched a daily and weekly binary BTC options market.
FTT is the local token of the exchange, which is issued on the Ethereum blockchain. FTT stakeholders will receive discounts on transaction fees based on a grading system. Other benefits include bonus voting in polls and increased airdrop rewards.
The first airdrop occurred in August 2020, when 500 million Serum (SRM) tokens were distributed to FTT holders. In order to differentiate from competitors, users’ collateral is shared in a common stablecoin wallet.
This means that traders can significantly reduce their margin requirements. Many leveraged tokens that mimic leveraged ETF stocks have also been listed, including 3x long Bitcoin and 3x short Litecoin.
Leveraged tokens come from the exchange’s perpetual swap contracts and operate as tradable ERC-20 tokens, which can be withdrawn and traded. These innovative products make FTX a popular transaction among investors, which is reflected in the increasing interest of its futures contracts.
As shown above, this number has increased by 340% in the past six months, surpassing the $2 billion mark, and greatly surpassing more mature exchanges.
By November 2020, the exchange will begin to conduct tokenized stock trading, although it is not available to US citizens. Its partner CM-Equity escrows the tokens of the redeemable underlying stock. Interestingly, it allows users to purchase less than one share of stock, which is particularly useful for high-priced stocks such as Amazon ($AMZN) and Google ($GOOG).
In December, FTX continued to innovate and launched pre-IPO futures contracts for AirBNB and Coinbase. These contracts allow traders to speculate on the price at which these companies will be listed on the stock exchange. The exchange also offers trading of themed products, including a basket of listed stocks related to cannabis.
By creating multiple markets with sufficient liquidity in its market-making structure, the exchange is able to attract the attention of a new customer base. Recently, Wall Street betting indices have been launched, including GameStop ($GME), Dogecoin (DOGE) and iShares Silver Trust ($SLV).
With the support of these popular products, the price of FTX tokens (FTT) has doubled since the beginning of 2021.
In order to further motivate the holding of tokens, FTX bought back and burned 33% of all fees incurred by the exchange and 10% of the net increase in its insurance fund. This process will continue until half of the initial supply of 350 million is destroyed.
Although this looks like a deflationary timetable, 31.25 million tokens have been allocated to the team, which represents at least 17.8% of the target 175 million circulation. In any case, considering the current $11.70 token price, the market value after the burning process is over $2 billion.
According to data from Messari, this figure is a 45% discount to Binance Coin (BNB)’s estimated market value in 2031. This is also roughly in line with the difference between the exchange’s total open positions of US$4.26 billion and US$2 billion.
Interestingly, Binance has undisclosed investments in FTX, which may reduce the motivation for direct competition.
Currently, it seems that the market is pricing the two tokens at the same valuation. Binance seems to be expanding its ecosystem through its Binance Smart Chain decentralized exchange, its blockchain project incubator and successful token launch platform.
On the other hand, FTX focuses on becoming a market leader in derivative product innovation.
Currently, all of these projects create value for token holders, and with the increase in scheduling and the increasing popularity among derivatives exchanges, FTT may continue to see further price increases.
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