Unlike Binance or Coinbase, FTX is a crypto derivatives exchange.
That is, instead of offering a crypto-to-crypto exchange service they provide other financial products like crypto futures and crypto index products. This makes FTX an ideal exchange for advanced traders who want to do more than just buy and hold.
In this FTX review we'll cover all of the various crypto products offered by FTX , including leveraged tokens and the "shitcoin" index, and explain how they work.
Not only that but we'll look at FTX's native token, FTT, and how it can be used in the FTX ecosystem.
Also, we'll explain how FTX's unique set of products sets the exchange apart from other crypto derivatives exchanges. But first, a bit of information about the exchange itself.
All About FTX
FTX was launched in May of 2019 and is currently under the leadership of Sam Bankman-Fried, the CEO. Bankman-Fried is a MIT graduate with a degree in physics and is well qualified to lead the exchange.
Right from the beginning FTX has picked up an impressive amount of volume and within six months of their launch they were doing, on average, nearly half a billion dollar's worth of trades every day. A very impressive number especially since other exchanges like Bitstamp, which have been around since the early days of crypto, are clearing much less.
Even more impressive than their volume, however, is their backer. Binance took a position in the FTX exchange early on which is a very good indicator of FTX's reputation. When crypto traders ask is FTX legit the answer is definitely yes, Binance would not have gotten involved with them if they were not.
Finally, in discussing the exchange it's important to mention who can't use it. At the moment FTX is closed to personal accounts from citizens of the United States of America, Cuba, Crimea, Iran, Syria, North Korea and Sudan. That's a pretty standard policy for a crypto exchange and in fact there are other exchanges which are closed to many more countries than FTX.
FTX's KYC Policy
Small time traders will find it possible to use FTX exchange without having to go through a KYC verification process. FTX allows up to $1,000 in withdrawals (lifetime) for non-KYC accounts. That's an awfully small withdrawal limit, however, users who only want to trade a few hundred dollars at a time may find it acceptable.
The next step is providing a full name, country of residence as well as region within that country. After entering that information a user's account will be upgraded to $2,000 daily withdrawal limit. Presumably that will be a high enough withdrawal limit for all but the most-serious traders.
The final KYC step requires that a user provides copies of their documents as well as a picture of them holding their documents. After providing this a user will be able to withdraw an unlimited amount of crypto on a daily basis.
More information on FTX's KYC policy is available here. It's worth noting that FTX uses chainalysis to check outgoing transactions. This is done to ensure that users are not withdrawing crypto to blacklisted addresses.
Like most exchanges FTX has a tiered trading fee structure. The more you trade in any given month, the lower the fees. The first tier has a maker fee of 0.02% and a taker fee of 0.07%. Fees decrease from there and more information is available here.
Similar to Binance with their BNB token, FTX offers a discount to anyone who holds their exchange token: FTT. For example, someone holding $100 worth of FTT can enjoy a 3% decrease in trading fees while someone holding $50,000 will see a 20% decrease in fees.
There are no deposit or withdrawal fees on FTX, making it one of the best deals in the cryptocurrency trading ecosystem.
Want to know how to buy on FTX? In fact while it's possible to do so, FTX is not really designed for Fiat purchases. It's better to buy on an exchange like Coinbase and then send the funds to FTX.
That being said, FTX does accept wire transfers. There are a few stipulations however. For one thing, users must have a level 3 KYC verification in order to use a wire transfer. Also, wire transfers can take a few days to clear especially when the originating currency is not USD.
It's also possible to withdraw via a wire transfer however there is a $75 fee for any withdrawal less than $10,000. That's why it's a much better deal to just send crypto to FTX, especially since they don't have any crypto deposit or withdrawal fees. More information on wire transfers is available here.
Partnership with Alameda Research
Alameda research is a professional crypto trading firm that both manages money and trades extensively throughout the cryptocurrency ecosystem. On their website Alameda research claims to trade anywhere from $600 million to $1.5 billion in crypto products every day.
All of that trading activity and their access to all of the major exchanges ensures that Alameda research always has access to deep liquidity. That's really the key secret behind FTX's early success. By leveraging the Alameda research trading engine they were able to provide a huge pool of liquidity right from the start, they didn't have to grow it slowly like other exchanges.
The Referral Program
FTX has a rather generous referral program. Anybody who refers a friend can get 30% of all the trading fees that they pay. The friend will also receive a 5% rebate on fees, it's a great deal for everyone!
How FTX is Different From Other Exchanges
What really makes FTX a unique cryptocurrency derivatives exchange is the number of exotic trading pairs that they have. For example, they have products like a Dogecoin and a BNB futures contract.
Most other exchanges, if they have a futures product at all, typically only have Bitcoin or Ethereum. Even Bitmex, the most popular of all crypto derivatives exchanges, only has about half a dozen coins available for trade.
Besides the trading pairs, FTX also has a few other unique trading products that few other exchanges offer.
When it comes to leverage FTX has a slightly different approach than the typical trading firm. Rather than allow their traders to take out a collateralized loan to buy more of a certain cryptocurrency, FTX offers leveraged tokens.
A leveraged token is an ERC20 token that has an inherent 3x exposure to the underlying asset. For instance, ETHBULL is a 3x long token. For every $1 that ETH goes up in value, ETHBULL goes up in value $3. Of course the inverse is also true and for every $1 that ETH goes down, the leveraged tokens ETHBULL goes down $3.
Leveraged tokens also work for taking a short position. ETHBEAR works similarly to ETHBULL, except that its value increases as the Ethereum price goes down.
The Advantages of Using Leveraged Tokens
One of the primary advantages of using leveraged tokens like BULL or BEAR, as opposed to taking out a leveraged position, is that leveraged tokens can lose a lot of their value without liquidating a position. For instance, FTX gives the example of a 33% market downturn. Were you to be leveraged long such a decrease in price would likely liquidate your position. By using leveraged tokens there will still be some value left even after a large market downturn.
Since leveraged tokens are ERC20 tokens they can be withdrawn and traded or stored on a hardware wallet. It's also possible to convert leveraged tokens to cash at anytime on FTX. This is the mechanism that helps to ensure that leveraged tokens keep their value. If a token becomes too high or low in value that difference can be arbitraged away.
There is a daily management fee of 0.03% for leveraged tokens and also a redemption fee of 0.10%. More information is available here.
Cryptocurrency Index Trades
Another one of FTX's unique offerings is their shitcoin index. This is an altcoin index which tracks the price of various shitcoins. Some of the more notable coins in the index include GAS, NANO and DENT. A full list of the coins included in the index is available on FTX's website.
This altcoin index is actually a really clever idea as it makes it easy to gain exposure to a huge number of coins without having to create wallets and pay fees on dozens of trades. Having a product like this on its order books really sets the FTX exchange apart from the competition.
Of course it's important to mention in this review the risks inherent to a shitcoin index. Investing in the cryptocurrency market is speculative already and a shitcoin index is even more speculative and volatile than the regular crypto market.
FTX's primary offering is their futures product. While other exchanges like Binance and even the CBOE offer Bitcoin futures, what sets FTX apart is the number of obscure futures products that they have.
For instance, FTX has perpetual swap futures for Bitcoin cash, Algorand, Matic, Cardano and even LEO. These are products that very few other exchanges offer. The catch, however, is that some of the less popular offerings have very little liquidity. The Dogecoin perpetual futures has less than $10,000 in daily trading volume, for instance.
In addition to individual coins, FTX also offers index futures. For instance, midcap perpetual futures and an exchange token perpetual futures product. For a full list of all futures products please check here.
Stablecoins as Collateral
There are several forms of collateral that can be used for futures trades on FTX. While FTT is one option, a better option is probably to use a stablecoin. The advantage of using a stablecoin is that the value remains constant. That way you never have to worry about a margin call because the value of your collateral is fluctuating (as it will if you use FTT).
FTX also settles PNL in stablecoins which is convenient as prices are quoted in dollars, just as they are in most other markets. More information on the use of stablecoins for futures trading is available on FTX's help page.
Recently FTX announced that they would begin offering options trading. This is a big deal as there are very few reliable crypto exchanges that have options products and the market is desperate for a good solution.
Unfortunately as of yet the only trade that's available is Bitcoin. The good news is that with more than $5 million in daily volume FTX seems to be finding success with their options trade. Hopefully in the future they will begin offering other choices like an Ethereum or Bitcoin cash futures product.
The FTT Token
FTX refers to the FTT token as the backbone of their platform. It has several different uses which we'll cover in a moment but first it's important to talk about the mechanics of the coin.
Similar to Binance, FTX uses trading fees to burn FTT. The idea is that as the circulating supply of the coin goes down the price will go up. That's good for FTX and good for traders holding the token.
FTT's most obvious use case is as a trading-fee reduction tool, as described above. Besides that it can also be used as collateral for futures trades, although there's always the risk of high volatility moves so that it's necessary to monitor the margin balance carefully.
It's also worth noting that in the event that the FTX insurance fund runs out, a portion of the exchange's FTT holding may be sold in order to replenish the fund. More information on FTT, including the specifics of how a coinburn is executed, can be found on FTX's website.
The OTC Desk
Although it won't apply to most people reading this review, FTX trading Ltd. does have an OTC desk capable of handling large trades. The OTC desk is open 24/7 making it convenient for traders located all over the world.
Trading OTC makes sense for investors submitting multi-million dollar orders who don't want to move the market. FTX's trading desk is backed by Alameda Research and can offer trades on more than 20 coins at any given time.
An Up and Coming Exchange
In this review of the FTX exchange we've covered a lot of different topics including futures trading, the use of leveraged tokens and of course FTX's most unique offering: the shitcoin index. Altogether these offerings make FTX a special exchange in the cryptocurrency ecosystem and one that is well worth registering for.
If there's one thing holding people back though it's the lingering question: is FTX safe? Admittedly it is a new exchange and that may dissuade some traders from using it. However, the fact that FTX is working with Alameda research and also Binance's investment testify that they're a reliable exchange that can be trusted.
One final note, should anything go wrong FTX has a great customer support center. Customer support agents can be contacted via either email or Telegram which makes it easy to get a quick answer.
If you're ready to start trading crypto derivatives just head over to FTX exchange today and create an account!