UPDATED as of 29th Nov 2021
FTX Exchange ($FTT Token) is a cryptocurrency trading platform. 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 FTX’s 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).
FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION
Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:
- SBF vs CZ War: What’s happening with FTX and Binance?
- Binance to Acquire FTX: What This Means for All Investors
- Binance Will NOT Acquire FTX: What is Next?
- BlockFi suspends withdrawals over unclear status of FTX
- FTX, FTX US and Alameda File for Bankruptcy
- FTX Hacked: Hacker Identity Revealed by Kraken
- What will happen to BlockFi?
- Were BlockFi’s assets held on FTX?
Key Advantages of FTX Exchange
- A large number of Trading products (Perpetual futures, Crypto Indexes, Volatility contracts)
- Lowest trading fees
- Hourly funding rates
- Robust insurance fund and policy against losses stemming from hacks or exploits
- Liquidation engine guarantees liquidity
- User-friendly website, information about features can be found by hovering over buttons or through their comprehensive set of guides and articles
- Customizable interface to suit individual trading needs
- Supports various trading integrations including automated trading
- VIP program with perks such as dedicated account managers, flexible API limits, and direct access to senior developers
- Fiat transfers and unlimited withdrawals
- Easy conversions and stablecoin settlements
- Extensive customer support including chat groups in more than 10 languages
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 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. The Exchange is owned by FTX Trading Limited, a company incorporated in Antigua and Barbuda.
Key Features and Functions
Futures trading
Futures are derivative instruments that obligate the associated parties to trade an asset at a pre-arranged date and price.
Trading in cryptocurrency futures invites the benefits of leverage. On FTX, you can apply leverage of up to 101X on most of the platform’s derivatives contracts. This means a 1% change in the price of an asset could result in 100% change in the funding amount – potentially allowing traders to double or nothing on the exchange.
FTX has included futures for lesser-known cryptocurrencies with low market caps, supporting over 80 cryptos. The majority of these digital assets cannot be traded via futures contracts on any other exchanges, which has attracted a unique set of traders and speculators to the FTX platform.
To give comparison, while FTX supports futures for over 80 cryptos, BitMEX, one of the leading cryptocurrency exchanges for derivatives trading, has futures contracts available for only 13 different digital coins.
FTX also allows perpetual futures, a class of futures contracts that do not expire. Instead, the price of perpetual futures is updated every hour to keep pace with the value of the underlying asset.
Learn more – Crypto Futures Trading with FTX
Spot trading
Spot trading is the method of buying and selling assets at the current market rate – called the spot price – with the intention of taking delivery of the underlying asset immediately. Spot market trading is popular among day traders, as they can open short-term positions with low spreads and no expiry date.
Though FTX focuses on derivatives, the platform is also home to a large selection of cryptocurrency spot markets. Here, traders will be trading the real asset and not a financial instrument that holds the underlying value of the asset.
At the moment, FTX features spot markets for nearly 70 cryptocurrencies.
Tokenized stocks
Through a partnership with German brokerage firm CM-Equity, FTX allows users to trade and redeem tokenized stocks. A tokenized stock is a type of derivative that tracks the performance of an underlying stock, such as Apple (NYSE: AAPL) or Tesla (NASDAQ: TSLA).
Buying shares in tokenized stock doesn’t give traders any ownership in the underlying equity. Instead, they own a derivative collateralized by a share of the underlying stock that tracks its performance. Even though the token purchased is a mirrored asset of the underlying equity, FTX ensures that investors are entitled to the same dividend payout if the true equity shares pay dividends.
Through FTX, users can trade (buy/sell) tokenized stocks, but if they are looking to redeem the token for its underlying stock, FTX users will have to go through CM-Equity, the custodian of the securities.
In order to trade tokenized stocks on FTX, users must be at least KYC level 2. Tokenized stock trading is available globally except for residents of the United States, Hong Kong, Singapore, Malaysia, Thailand, Cuba, Crimea, Sevastopol, Iran, Afghanistan, Syria, North Korea, Antigua and Barbuda.
Unlike the traditional equities markets, whose regular operating hours are 9:30 am – 4 pm in the US, tokenized stock trading on FTX will be open 24/7.
Cryptocurrency derivatives trading
FTX is primarily a cryptocurrency derivatives exchange. This means that traders do not deal in real assets, instead they trade derivative products which reflect the value of the underlying asset. This could be in terms of contracts or tokens that represent the price of the asset.
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 are much more volatile than Forex direct signals.
Learn more- Derivatives Trading with FTX Exchange: Ultimate Guide
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.
Volatility Tokens
FTX volatility tokens are ERC20 tokens that track the implied volatility of BTC based on MOVE contracts. These tokens can be traded, held, or transferred the same as any other token. The main difference with volatility tokens is that they provide traders with exposure to the implied volatility of crypto assets.
There are currently two FTX volatility tokens: BVOL and iBVOL. BVOL targets tracking the daily returns of being 1x long the implied volatility of BTC and iBVOL targets tracking the daily returns of being 1x short the implied volatility of BTC.
As an example, say that BTC is expected to move 1% per day. If BTC is trading at $10,000, then the daily move is $100; but if BTC falls to $9,000, the daily move is $90. This means that if the implied percent volatility doesn’t change, a decrease in BTC price will lead to a decrease in BVOL price and an increase in iBVOL price.
FTX leveraged tokens
Leveraged tokens are a feature unique to FTX. They are ERC-20 tokens that 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%.
You can find a list of leveraged tokens here
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.
Prediction markets
Prediction Markets
FTX’s Prediction markets work more or less like a traditional ‘betting’ set up. Instead of a financial asset, traders speculate on the possible outcome of a real-world event. If their prediction comes true, they stand to make a profit. If their prediction is wrong, they will lose their stake.
One current prediction market launched by FTX is the 2024 US presidential election. FTX has arranged this prediction market in the form of a futures contract and the ticker symbol of the futures contract is TRUMP2024. If Donald Trump wins the 2024 presidential election, the futures contract settles to $1. If any other outcome takes place, then the futures contract settles to $0.
Such prediction markets are an interesting way of trading outside the traditional norms of cryptocurrency exchanges.
Fiat Currencies
FTX supports multiple fiat currencies and is able to handle large size wire transfers in and out with low fees. Currently, FTX supports deposits and withdrawals in USD, EUR, GBP, AUD, HKD, SGD, ZAR, CAD, CHF, and BRL.
Supported countries
FTX Services are available globally as long as the user is not in a restricted country. FTX Token (FTT) are not available to clients located or residing in Cuba, Crimea, Sevastopol, Iran, Syria, North Korea, Antigua or Barbuda.
FTX offers trading for US citizens on FTX.us. Note however their fee structures and services offered may differ from FTX.com, which is the subject of this review.
Supported Cryptocurrencies and Payment Methods
FTX exchange supports over 100 cryptocurrencies. A unique feature is that the exchange also offers trading for several indices e.g. EXCH- comprised of several exchange tokens by using the weighted average of prices for BNB, HT, OKB and LEO.
The exchange accepts payment via credit card and wire transfers using supported fiat currencies along with most other stablecoins. They also have their own OTC desk so traders can convert their cryptocurrencies to fiat for withdrawals.
Decentralised Finance: Is FTX the best place for trading DeFi coins?
Decentralised Finance (DeFi) has established itself as the top sector for high value tokens. FTX supports trading for many DeFi tokens including:
- Aave ($AAVE)
- Synthetic ($SNX)
- Yearn.finance ($YFI)
- Uniswap ($UNI)
- Sushiswap ($SUSHI)
- Compound ($COMP)
- Kyber Network ($KNC)
- Maker ($MKR)
- 0x Protocol ($ZRX)
- Balancer ($BAL)
- Curve ($CRV)
- Alpha Finance ($ALPHA)
- REN ($REN)
- Bancor Protocol ($BNT)
- Loopring ($LRC)
- mStable ($MTA)
- Ampleforth ($AMPL)
- Swipe ($SXP)
- Solana ($SOL)
- ChainLink ($LINK)
- Thorchain ($RUNE)
- 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 $COMP. So users can get exposure to all 11 different DeFi tokens with one futures contract based on the weighted average of these tokens.
What is Serum token ($SRM) and how to get airdrops on FTX
Serum was created from the same team behind FTX. Serum powers a DEX ecosystem that is decentralized, cheap, and fast while supporting multiple chains, stablecoins, order books, and wrapped coins.
DEXs such as Uniswap and Balancer are becoming almost unusable due to high transaction costs. 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.
$SRM is Serum’s ecosystem token. It is a utility token that will be used for offering trading discounts, validation bonds and holders will have specialised governance power over Serum.
Users who hold 500 or more FTX tokens ($FTT) on the exchange will be eligible to participate in SRM airdrops. Users can also increase their amount of airdropped $SRM by staking their $FTT.
Learn more with our Serum DEX guide and review.
Deposit and Withdrawal Fees
For cryptocurrencies, there are no fees on deposits and withdrawals, except for ETH, ERC-20 tokens, or small BTC withdrawals. FTX users will pay the blockchain fees for all ETH, ERC20 tokens unless they have FTT staked.
Small BTC withdrawal fees: BTC withdrawals > 0.01 BTC are free. BTC withdrawals < 0.01 BTC are charged withdrawal fees after your first free one per day.
For fiat, withdrawals below $10,000 in value will have a $75 bank fee. Otherwise, there are no fees, including OTC trading and wallet conversions.
Trading Fees
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 2021. It is common for exchanges to have lower fees for order makers as they want to promote a larger order book – thus offering 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 has a tiered fee structure for all futures and spot markets, as follows:
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%.
For spot margin trading, borrowers are charged a fee on borrows on top of the interest rate paid to the lenders. Details on how the borrow rate is calculated can be seen in the fees section of the spot margin explainer.
There are no fees on futures settlement.
Fees for move contracts depend on the price of the underlying index, not the price of the move contract.
You can learn more about their fees and discounts here.
See also: How to save money on crypto exchange fees
Is FTX Exchange safe?
FTX uses several bank-like security features to ensure the safety of user’s personal information and security of funds stored on the crypto exchange. To date, there have been no reported hacks or security incidents.
- FTX’s password requirements – in the registration phase, FTX requires their users to use passwords that are complex enough for hackers to have difficulty in cracking them.
- 2FA requirement – just like most exchanges, FTX requires their users to have 2FA enabled to be able to withdraw their funds, for additional security.
- Proactive CEO – FTX’s CEO, Sam Bankman-Fried is known to be really active on Twitter, and actively responds to bug reports. While this is not a guarantee of FTX’s security, it just shows that the CEO is taking exchange feedback and site uptime really really seriously.
Though FTX has been running for more than 2 years without security issues, they are still a relatively young exchange so we really can’t know for sure if they could fend off the hackers for longer amounts of time.
Always remember — no matter how big and reputable a certain cryptocurrency exchange is, it doesn’t guarantee that it’ll be secure forever. Exchanges are a very hot target for hackers simply because they hold a lot of coins from their users.
As always, it is far safer for you to store your funds on a non-custodial wallet; and preferably, a reputable hardware wallet like the Ledger Nano X. That way, even if every single exchange in existence gets hacked, your funds will remain untouched.
$FTT Staking
$FTT is FTX’s exchange token. Staking $FTT on the exchange rewards users with the following benefits:
- Increased referral rates – referrers that stake FTT are paid a higher fraction of their referees’ fees
- Maker fee override – Stakers gain a new make fee schedule that overrides the normal fee schedule (in addition to the standard FTT fee discounts).
- Bonus votes – stakers get bonus votes in FTX polls
- Increased airdrop rewards – stakers get increased SRM airdrops
- Waived blockchain fees – stakers get a number of free ERC20 and ETH withdrawals per day
- IEO tickets – stakers get tickets for IEOs (Initial Exchange Offerings) hosted oin FTX
The FTT staking program uses a tier method so the more FTT staked, the greater the rewards.
FTX acquires Blockfolio
On 26th August 2020, FTX announced it has acquired Blockfolio for a sum of USD$150 million. Blockfolio is a popular consumer app that helps users track their cryptocurrency portfolios. Blockfolio also lets users view the performance of a particular cryptocurrency and connect to their exchange accounts.
This acquisition is generating excitement across the cryptocurrency space because it combines FTX’s reputation and gearing for professional traders with Blockfolio’s consumer friendly app. It is foreseen that FTX would want to launch a more simple trading experience for its retail consumers, and it appears they are already working together on a a Blockfolio-branded trading product.
FTX Spot Margin Trading
Spot margin trading is a method that uses funds provided by a third party. This is made possible by margin accounts, which allow traders to leverage their positions – and therefore their gains.
Once the feature is enabled, users can lend one token on demand to borrow another. For example, lending US$ 56,000.00 to borrow 1 BTC. Those borrowed dollars would be locked up and potentially loaned to another user. Whoever lends, receives interest. On the other hand, whoever borrows, pays interest.
There are several ways to implement margin spot trading and ask/lend. At FTX, the whole process is summarized in net balances. As long as the user has enough margin, they can borrow spot tokens simply by spending beyond their account balance. This also applies to withdrawals.
FTX makes it easy to manage different positions. The same commands (buy / sell / deposit / withdraw) work normally and are allowed as long as the account has enough collateral to support the necessary loans.
Most assets are available for borrowing. See the complete list of assets that can be borrowed and lent.
Conclusion: FTX Exchange Pros and Cons
Pros
- FTX’s lending feature can potentially provide a good source of passive income for its users
- 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.
Cons
- Lots of markets to trade from which could be complicated for complete beginners.
- Due to regulations, there are regional restrictions without providing alternatives for users from those jurisdictions.
Final Score
Services offered: 4.5/5
Cryptocurrency support: 4.5/5
Fees: 5/5
Security: 4/5
Review Score: 4.5/5
FAQ
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).
Futures are financial contracts obligating the buyer to purchase an asset, or the seller to sell an asset at a predetermined future date and price. A futures contract allows an investor to speculate on the direction of an asset. Futures are also used to hedge the price movement of the underlying asset to help prevent losses from unfavorable price changes.
A tokenized stock is not a security – rather, it is a derivative in the form of a token which is tethered or ‘pegged’ to an underlying asset. Rather than being pegged to fiat like a stablecoin, these tokens are pegged to a publicly listed stock.
FTT is the utility token on the FTX exchange. It can be used to reduce trading fees on the exchange or serve as collateral against futures positions. It can also be staked to earn SRM tokens.
Serum is a decentralized exchange (DEX) for the decentralized finance (DeFi) sphere from the same team that created FTX exchange. It is said to test the boundaries of DEXs using a non-Ethereum blockchain.
Yes, the FTX exchange is legit and safe, as are other centralized exchanges. It has an experienced team and reputable backers. FTX has multiple security features and has not suffered any security breaches to date.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
