FTX, a new cryptocurrency derivatives exchange and trading platform, has raised $8 million in a funding round led by blockchain-focused fund Proof of Capital, Consensus Lab, FBG and Galois Capital.
Proof of Capital is a $50 million venture capital (VC) fund launched in April 2019 by partners from Horizons Ventures, Greylock Partners and 500 Startups, and backed by the likes of HTC and YouTube co-founder Steve Chen.
The fund invests in early-stage blockchain startups with a focus on fintech, infrastructure, hardware and consumer products, and made one investment prior to FTX in Ubanx, an API banking infrastructure for fiat-to-crypto exchange in Latin America.
Chris McCann, managing partner at Proof of Capital, said in a statement that his firm will help FTX go to market in Asia.
Developed by a team of former traders at Jane Street, Susquehanna and Optiver, FTX is a new crypto exchange and trading exchange offering futures contracts, leveraged tokens and an over-the-counter (OTC) portal. The platform promises to be “powerful enough for professional trading firms and intuitive enough for first-time users,” according to the company’s website, and claims more than $300 million in total trading volume since its launch.
FTX is currently expanding its team; it recently hired former employees of Huobi, Kraken and Circle, with more to come, Sam Bankman-Fried, co-founder and CEO of FTX Trading, wrote in a blog update on August 5, 2019.
It is now focusing on expanding its userbase and has started rolling out user acquisition strategies in Eastern Europe, Southeast Asia, Taiwan and Australia.
“We have some pretty badass team members from Jane Street, Optiver, Susquehanna, Google and Facebook but we’re planning to hire to grow the team, especially in Hong Kong,” Bankman-Fried told Bitcoin Magazine.
“Hong Kong is the financial hub of Asia so it will give us even more financial talent and fresh blood. We want to hire the best people from both traditional and decentralized financial institutions and expand our userbase globally. We are looking into hashrate futures and many other products to come.”
FTX’s origins trace back to 2017, when the team set out to build Alameda Research, a global trading platform which now claims to trade up to $1 billion per day and manage over $100 million in digital assets.
“Our CTO Gary Wang was tasked with writing an entire quantitative trading firm's software — from algorithms to front end UIs to trading systems to API connections — more or less autonomously. That software, combined with our experience at companies like Jane Street and Google, is what inspired FTX,” Bankman-Fried said. “We designed FTX for ourselves but as it evolved, we realized our platform has the potential to help other traders tap into derivatives and futures in a way that wasn't before possible.
Charting Bitcoin and Shitcoin Indices
According to Bankman-Fried, FTX’s biggest differentiator is that the platform focuses on making complex financial products more accessible to the average trader.
“It’s much of the reason we created investment vehicles like FTX BTC, a bitcoin futures product that lets traders speculate on the future price of bitcoin, and FTX SHIT, a ‘shitcoin’ index containing a basket of small-cap cryptocurrencies so traders can more effectively hedge risk and create new opportunities,” he said.
The company says its proprietary technology and trading features make the trading platform “one of the most liquid cryptocurrency exchanges in the market.”
FTX says its liquidation engine prevents clawbacks by slowly closing overleveraged positions while minimizing market impact, and its backstop liquidity provider system prevents accounts from going below bankruptcy level by automating liquidating and closing down at-risk accounts.
In addition to futures contracts, FTX offers three leveraged tokens for every underlying token or index listed on FTX: BULL (3x), BEAR (-3x) and HEDGE (-1x).
Each of these has an associated account on FTX that takes leveraged positions on the perpetual futures and can be created/redeemed for its share of the assets of that account. These tokens can be withdrawn from FTX as ERC-20 tokens.
Finally, FTX’s 24/7 OTC portal, powered by quant trading firm Alameda Research, allows investors to make OTC trades on over 20 coins with no fees and instant settlement.
The FTX ecosystem has its own native utility token, FTT, which provides holders with a number of benefits including weekly buying and burning of fees, lower trading fees, OTC rebates and collateral for futures trading.