FTX Exchange ($FTT Token) is a leveraged cryptocurrency trading platform offering derivatives trading. The key advantage of FTX is that it built by professional traders “Alameda research” – a quant trading firm that is responsible for 30% of the market trading volume on major exchanges. FTX offers innovative products not found on other exchanges such as MOVE indices that track the volatility of cryptocurrencies and leveraged tokens (such as the 3XBULL tokens) which are long positions represented by ERC-20 tokens. In this review, we’ll explain the products on offer and how to use FTX exchange. In addition, we’ll look at the platform safety measures such as liquidation & clawback protection. Finally, we’ll look at the FTX trading fees and trading discounts (such as the $FTT native platform token).
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Key Advantages of FTX
- A large number of Trading products (Perpetual futures, Crypto Indexes, Volatility contracts)
- Lowest trading fees
- Hourly funding rates
- Robust Insurance fund and policy
History of FTX Exchange
FTX was launched in 2019 by crypto trading veterans Sam Bankman-Fried (CEO) and Gary Wang (CTO). The motto of the exchange has been that it is is built “by traders for traders”, with the objective of offering a wider range of trading than other cryptocurrency exchanges. The founders come from a strong trading background, having established Alameda Research, a crypto quant fund that has topped trading many trading charts by volume. FTX’s main base of operations is in Hong Kong. The Exchange is owned by FTX Trading Limited, a company incorporated in Antigua and Barbuda.
Key Features and Functions
Generally accepts your local currency
USD, TRY, AUD, GBP, EUR & HKD
USD, EUR, GBP and more
EUR, USD, GBP & TRY
The core trading product offered by FTX is cryptocurrency derivatives trading such as Bitcoin Perpetual Futures. Derivatives are financial tools that derive value from the underlying product – in this case, cryptocurrencies such as Bitcoin. FTX exchange trades contracts based on the underlying asset instead of the asset themselves – this allows higher leverage and more types of products. FTX allows up to a 101X max leverage on derivative products. This means a 1% change in the price of Bitcoin could result in 100% change in the funding amount – potentially allowing traders to double or nothing on the exchange. This type of leverage is popularized by the BitMEX exchange which also allows 100X leverage.
Derivative products are by institutions, companies, miners, and traders to gain the advantage of market conditions. For example, Bitcoin miners who know they will receive Bitcoin in the future may choose to short Bitcoin at current prices to protect themselves from future price volatility.
Derivative products allow traders to speculate on the future value of various digital assets and trade their corresponding futures. This is different from regular trading as there are “shorting” options where traders benefit from an asset falling in price (without initially owning the asset). Traders can also take averaged positions where they can drastically increase their exposure to an asset with 5, 10 or even 50x leverage. Cryptocurrency derivatives is much more volatile than Forex direct signals.
Types of Derivatives Products on FTX:
- Perpetual Futures – Futures is a type of standardized forward contract, a legal agreement to buy or sell an asset at a predetermined price.
- Options – Options are a special form of futures contract that gives the holder the right but not the obligation to sell at a future strike price. These are commonly used to protect against price volatility.
- MOVE – These are contracts that settle in the absolute change in the price of a coin over time. Time periods can be daily, weekly, or quarterly.
- Spot – Spot trades are market matched orders for an asset
- Leveraged Tokens – are special tokens that provide a leveraged exposure to cryptocurrency markets without having to manage a leveraged position.
Special feature: FTX leveraged tokens
Leveraged tokens are a feature unique to FTX. They are ERC-20 tokens which are created to give traders leveraged exposure to cryptocurrency markets without the specifics of managing a leveraged position. There are 4 leveraged tokens for every future on FTX:
- BULL (+3x);
- BEAR (-3x);
- HEDGE (-1x); and
- HALF (+0.5x).
Here’s an illustration of the differences between the 4 leveraged tokens, taking USDT as an example. Generally if USDT goes up 1% during the day, then:
- USDTBULL goes up 3%;
- USDTBEAR goes down 3%;
- USDTHEDGE goes down 1%; and
- USDTHALF will go up 0.50%.
On the other hand if USDT goes down 1% during the day, then:
- USDTBULL goes down 3%;
- USDTBEAR goes up 3%;
- USDTHEDGE goes up 1%; and
- USDTHALF goes down 0.50%.
As mentioned, these tokens are created. For example if you want to create USD$1,000 worth of COMPBEAR you would send in USD$1,000 and the COMPBEAR account on FTX will buy USD$3,000 worth of COMP perpetual futures. Hence your COMPBEAR token now represents 3x long COMP. The token can also be redeemed for their net asset value. To do this you send your USD$1,000 COMPBEAR back to FTX for redemption. This will destroy the token, cause the COMPBEAR account to sell back the USD$3,000 worth of futures and credit your trading account with USD$1,000.
Do note however that leveraged tokens are high risk trading products and users should ensure they do their own full research and understand how they work before considering trading them.
Special Feature: Trading Politics on FTX
FTX also allows trade of political futures – notably the 2020 presidential elections. The TRUMP-2020 (TRUMP) contract will expire to USD $1 if Donald Trump wins the 2020 US presidential election, or USD $0 otherwise. Similarly, the other President 2020 contracts (i.e. those for the other presidential candidates) will settle to USD $1 if they win this years’ election and USD $0 if they do not. This type of trading is similar to the idea of prediction markets, such as the ones designed by AUGUR. Prediction markets work by soliciting the mass markets to predict the outcomes of key results.
FTX Services are available globally as long as the user is not in a restricted country. FTX Token (FTT) are not available to clients located or residing in Cuba, Crimea, Sevastopol, Iran, Syria, North Korea, Antigua or Barbuda.
FTX offers trading for US citizens on FTX.us. Note however their fee structures and services offered may differ from FTX.com, which is the subject of this review.
Supported Cryptocurrencies and Payment Methods
The Exchange supports over 30 cryptocurrencies. A unique feature is that the Exchange also offers trading for several indices e.g. EXCH- comprised of several exchange tokens by using the weighted average of prices for BNB, HT, OKB and LEO.
The Exchange accepts payment in USD, TRY, AUD, GBP, EUR and HKD along with most other stablecoins. They also have their own OTC desk so traders can covert their cryptocurrencies to fiat currencies for withdrawals.
Decentralised Finance: Is FTX the best place for trading DeFi coins?
Decentralised Finance (DeFi) is THE hot topic right now and FTX knows it. In a matter of weeks they have been rapidly expanding their support for DeFi tokens. FTX supports trading for the following 11 DeFi tokens: Ampleforth ($AMPL), Swipe ($SXP), Solana ($SOL), Yearn.finance ($YFI), ChainLink ($LINK), Compound ($COMP), Thorchain ($RUNE), Kyber Network ($KNC), Balancer ($BAL), Maker ($MKR) and DMM Governance ($DMG).
FTX is also capitalising on this DeFi wave by offering DeFi Index Perpetual Futures, which tracks the price of several DeFi coins such as $KNC, $LEND, $MKR, $KAVA, $ZRX, $LRC, $REN, $REP, $BNT, $SNX and $COMP. So users can get exposure to all 11 different DeFi tokens with one futures contract based on the weighted average of these tokens.
What is Serum ($SRM) and how to get airdrops on FTX
Serum is an upcoming Decentralised Exchange (DEX) created by the team behind FTX. Serum will be directly interoperable with Ethereum, giving it an edge over other spinoffs from centralised exchanges like Binance DEX. FTX’s inspiration for Serum is that they find DEXs such as Uniswap and Balancer are becoming almost unusable and charging transaction costs at almost USD $10. Therefore, Serum aims to offer a permissionless and frictionless trading experience that uses Ethereum’s best attributes to make them accessible in real-time for a fraction of the cost.
$SRM is Serum’s ecosystem token. It is a utility token will be used for offering trading discounts, validation bonds and holders will have specialised governance power over Serum.
Deposit and Withdrawal Fees
The Exchange does not charge deposit or withdrawal fees. There are also no additional fees for OTC trading or converting in your Exchange wallet.
For all futures and spot markets, Taker fees are 0.07% for the lowest trading tier and 0.00% maker fees for the rest of 2020. It is common for exchanges to have lower fees for order makers as they want to promote a larger order book – thus offer trading discounts for makers. It is also important to remember that a funding fee will be applied for perpetual contracts. This funding fee is not taken by the exchange, instead, it will be given to the holders of the opposing contract (positive funding fee means long positions will pay short holders).
FTX Exchange offers discounts for higher-volume traders and those participating in their referral program. They also have a VIP program for professional traders and a Backstop Liquidity Provider program for market makers. Holders of the Exchange’s own FTT token are given percentage discounts on trading fees based on how much FTT they hold.
For leveraged tokens, 0.10% is charged for creating or redeeming them and there is a charge of 0.03% per day for managing them. Using leverage will also correspondingly increase the trading fees: 50x leverage increases trading fees by 0.02% and 100x or higher leverage increases trading fees by 0.03%.
You can learn more about their fees and discounts here.
Is FTX Exchange safe in 2020?
FTX is an exchange developed by “traders for traders”. The team behind FTX, Alameda research has been trading extensively and market-making on various exchanges. So far FTX has an excellent security record. This gives FTX a strong reputation and presence in the industry. However whilst they do have an excellent security record, they are relative newcomers to this game, having only been around for a year or so. Hence without going through the test of time like other exchanges, we cannot say that it is definitively safe.
FTX acquires Blockfolio
On 26th August 2020, FTX announced it has acquired Blockfolio for a sum of USD$150 million. Blockfolio is a popular consumer app that helps users track their cryptocurrency portfolios. Blockfolio also lets users view the performance of a particular cryptocurrency and connect to their exchange accounts.
This acquisition is generating excitement across the cryptocurrency space because it combines FTX’s reputation and gearing for professional traders with Blockfolio’s consumer friendly app. It is foreseen that FTX would want to launch a more simple trading experience for its retail consumers, and it appears they are already working together on a a Blockfolio-branded trading product.
Conclusion: FTX Exchange Pros and Cons
- Developed by traders, for traders.
- Focused on derivatives products. A plus if that is what you are specifically interested in.
- Unique features, such as trading on political features and indices which some may find interesting.
- Competitive trading fees (0.00% maker fees for the rest of 2020!!). And even provide further discounts for specific users.
- No record of hacks so far.
- Relatively new, only launched a year ago.
- Regional restrictions without providing alternatives for users from those jurisdictions.
Services offered: 4.5/5
Cryptocurrency support: 4.5/5
Review Score: 4.5/5
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BULL and BEAR tokens are special leveraged tokens that have 3X the normal exposure to the underlying asset (Bitcoin). This means that a 1% increase in the price of Bitcoin will give a 3% increase in the Bitcoin BULL token. These tokens allow traders to increase their exposure to an asset without the need to take loans. BEAR tokens are the opposite, they would increase in value when Bitcoin decreases in value.
ETHBULL and ETHBEAR tokens are special leveraged tokens that have 3X the normal exposure to the underlying asset (Ethereum). This means that a 1% increase in the price of Ethereum will give a 3% increase in the ETHBULL token. These tokens allow traders to increase their exposure to an asset without the need to take loans. ETHBEAR tokens are the opposite, they would increase in value when Ethereum decreases in value.
Bitcoin MOVE contracts track the volatility of Bitcoin within a certain time period – the more Bitcoin price moves the higher the value of the contract. This contract is unique in that it doesn’t matter if Bitcoin increases or decreases in price – the contract will go up in value so long as there is price movement. What is important with MOVE contracts are the settlement times, they are at 00:00 UTC (strike price) and 23:59 UTC (settlement price).