Unlike Binance or Coinbase, FTX is a crypto derivatives exchange.
That is, instead of offering a crypto-to-crypto exchange service, they offer other financial products such as 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.
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In this FTX review we will cover all the different crypto products offered by FTX, including leveraged tokens and "shitcoin" indexes, and explain how they work.
Not only that but we will look at FTX's native token, FTT, and how it can be used in the FTX ecosystem.
Also, we will explain how FTX's unique suite of products sets the exchange apart from other crypto derivatives exchanges. But first, a little information about the exchange.
All about FTX
FTX was launched in May 2019 and is currently led by Sam Bankman-Fried, CEO. Bankman-Fried is an MIT graduate with a physics degree and well qualified to lead the exchange.
Since inception FTX has achieved an impressive amount of volume and within six months of their launch they were trading an average of half a billion dollars per 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, are their supporters. Binance took an early position on the FTX exchange which is a very good indicator of FTX's reputation. When crypto traders ask if FTX is legit then the answer is definitely yes, if they weren't Binance wouldn't be associated with them.
Finally, when discussing exchanges it is important to mention who cannot use them. FTX is currently closed to individual accounts of citizens of the United States of America, Cuba, Crimea, Iran, Syria, North Korea and Sudan. That's a pretty standard policy for crypto exchanges and in fact there are other exchanges that are closed in many more countries than FTX.
KYC Policy of FTX
Small time traders will be able to use the FTX exchange without going through the KYC verification process. FTX allows for withdrawals (lifetime) of up to $1,000 for non-KYC accounts. That's a terribly small withdrawal limit, however, users who only want to trade a few hundred dollars at a time may find it acceptable.
The next step provides the full name, country of residence as well as the region within that country. After entering that information the user's account will be upgraded to the $2,000 daily withdrawal limit. It will likely be a high withdrawal limit for all but the most-serious traders.
The final KYC step requires the user to provide copies of their documents as well as a photo of them holding their documents. After providing this user will be able to withdraw unlimited amount of crypto on daily basis.
More information about FTX's KYC policy is available here. It is worth noting that FTX uses chainanalysis to check outgoing transactions. This is done to ensure that users are not withdrawing crypto to blacklisted addresses.
FTX Fees
Like most exchanges, FTX has a tiered trading fee structure. The more you trade in any given month, the lower the fee. The first tier has a maker fee of 0.02% and a taker fee of 0.07%. Fees drop from there and more information is available here.
Like Binance with their BNB token, FTX offers a discount to anyone holding their exchange token: FTT. For example, someone with $100 worth of FTT can enjoy a 3% reduction in trading fees while someone with $50,000 will see a 20% reduction in fees.
There are no deposit or withdrawal fees on FTX, making it one of the best deals in the cryptocurrency trading ecosystem.
fiat deposits
Want to learn how to buy on FTX? While it is actually possible to do so, FTX is not really designed for Fiat purchases. Better to buy on an exchange like Coinbase and then send the funds to FTX.
That said, FTX accepts wire transfers. However, there are some conditions. For one thing, users are required to have Level 3 KYC verification to use wire transfers. Also, wire transfers may take a few days to clear, especially when the source currency is not USD.
Withdrawals by wire transfer are also possible although there is a $75 fee for withdrawals under $10,000. That's why it's a better deal to just send crypto to FTX, especially since they have no crypto deposit or withdrawal fees. More information about wire transfers is available here.
Partnership with Alameda Research
Alameda Research is a professional crypto trading firm that manages and trades money across the entire cryptocurrency ecosystem. Alameda Research claims on their website that anywhere from $600 million to $1.5 billion is traded in crypto products every day.
All that trading activity and their access to all major exchanges ensures that Alameda Research always has access to deep liquidity. That's actually the main secret behind KFTX's initial success. By leveraging the Alameda Research trading engine, they provide a large pool of liquidity right from the startwere able to, they did not have to grow slowly like other exchanges.
Referral Program
FTX has a generous referral program. Anyone who refers a friend can earn 30% of all trading fees they pay. A friend will also get a 5% rebate on fees, a great deal for everyone!
How is FTX different from other exchanges?
What really makes FTX a unique cryptocurrency derivatives exchange is the number of foreign trading pairs they have. For example, they have products like Dogecoin and BNB futures contracts.
Most other exchanges, if they have a futures product at all, are usually just Bitcoin or Ethereum. Even Bitmex, the most popular of all crypto derivatives exchanges, only has about half a dozen coins available for trading.
In addition to trading pairs, FTX also has some other unique trading products that other exchanges offer.
Leveraged Tokens
FTX has a slightly different approach than a typical trading firm when it comes to leverage. Instead of allowing their traders to take out collateralized loans to buy more specific cryptocurrencies, FTX offers leveraged tokens.
A leveraged token is an ERC20 token that has 3x exposure to the underlying asset. For example, ETHBULL is a 3x long token. For every $1 that ETH increases in value, ETHBULL increases in value by $3. Of course, the reverse is also true and for every $1 that ETH goes down, leveraged tokens ETHBULL goes down $3.
Leveraged tokens also work for taking short positions. ETHBEAR works the same as ETHBULL, except that its value increases as the price of Ethereum decreases.
Advantages of using leveraged tokens
One of the primary advantages of using leveraged tokens like BULL or BEAR, as opposed to taking leveraged positions, is that leveraged tokens can lose much of their value without liquidating the position. For instance, FTX illustrates a 33% market decline. Such a drop in price will end your position if you are long on profit. Using leveraged tokens will leave some value even after a major market downturn.
As leveraged tokens are ERC20 tokens, they can be withdrawn and traded or stored in a hardware wallet. It is also possible to convert leveraged tokens to cash at any time on FTX. This is the mechanism that helps ensure that leveraged tokens hold their value. If a token becomes too high or too low in value, the difference can be arbitrated.
There is also a daily management fee of 0.03% and a redemption fee of 0.10% for leveraged tokens. More information is available here.
Cryptocurrency Index Trades
Another one of FTX's unique offerings is their Shitcoin index. This is an altcoin index that tracks the price of various shitcoins. Some of the more notable coins in the index include GAS, NANO and DENT. A complete list of coins included in the index is available on FTX's website.
This altcoin index is a really clever idea because it makes it easy to get exposure to a large number of coins without building a wallet and paying fees on dozens of trades. Having a product like this on its order book really sets FTX Exchange apart from the competition.
Of course, it is important to mention the risks inherent in the Shitcoin index in this review. Investing in the cryptocurrency market is already speculative and the Shitcoin index is even more speculative and volatile than the regular crypto market.
Futures Trading
FTX's primary offering is their futures product. While other exchanges such as Binance and CBOE also offer Bitcoin futures, what sets FTX apart is the number of obscure futures products they have.
For example, FTX has perpetual swap futures for Bitcoin Cash, Algorand, Matic, Cardano and LEO. These are products that very few other exchanges offer. However, the catch is that some of the less popular offerings have very little liquidity. For example, Dogecoin Perpetual Futures has less than $10,000 in daily trading volume.
In addition to individual coins, FTX also offers index futures. For example, Midcap Perpetual Futures and Exchange Token Perpetual Futures Product. Please check here for a complete list of all futures products.
Stablecoins as collateral
There are several forms of collateral that can be used for futures trades on FTX. While FTT is an option, perhaps using a stablecoin is a better option. The advantage of using a stablecoin is that the value remains stable. That way you never have to worry about a margin call as the value of your collateral fluctuates (like if you use FTT).
FTX also settles PNL in stablecoins which is convenient since prices are quoted in dollars, as they are in other markets. More information about using stablecoins for futures trading is available on FTX's help page.
Options Trading
Recently FTX announced that they will start offering options trading. This is a big deal because there are very few reliable crypto exchanges that have options products and the market is desperate for a good solution.
Unfortunately the only trade available so far is Bitcoin. The good news is that the daily volumeWith over $5 million in FTX success in their options trading. Hopefully in the future they will start offering other options like an Ethereum or Bitcoin Cash futures product.
FTT Token
FTX refers to the FTT token as the backbone of their platform. It has many different uses which we will cover in a moment but first it is important to talk about the mechanics of the coin.
Like Binance, FTX uses trading fees to burn FTT. The idea is that as the circulating supply of coins decreases, the price will increase. It is good for FTX and good for traders who own the token.
The most obvious use case for FTT is as a means of reducing trading-fees, as described above. It can also be used as collateral for futures trades, although there is always the risk of high volatility moves so margin balances need to be carefully monitored.
It is also worth noting that in the event that the FTX insurance fund is depleted, a portion of the exchange's FTT holdings may be sold to replenish the fund. More information on FTT, including details on how coinburn is run, can be found on FTX's website.
OTC Desk
Although it may not apply to most people reading this review, FTX Trading Limited has 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 who don't want to move the market. FTX's trading desk is backed by Alameda Research and can offer trades on over 20 coins at any given time.
An up and coming exchange
In this review of the FTX exchange we cover a wide variety of topics, including futures trading, the use of leveraged tokens, and of course FTX's most unique offering: the Shitcoin Index. All in all these offerings make FTX a unique exchange in the cryptocurrency ecosystem and one worth signing up for.
If there's one thing that's holding people back though, it's the lingering question: Is FTX safe? Admittedly, it's a new exchange and it may discourage some traders from using it. However, the fact that FTX Alameda is working with research and even Binance's investment testifies that they are a reliable exchange that can be trusted.
One final note, FTX has an excellent customer support center if anything goes wrong. Customer support agents can be contacted via email or telegram which makes it easy to get a quick reply.
If you're ready to start trading crypto derivatives, head over to FTX Exchange and create an account today!
source:coinfi.com