FTX Exchange Review: Game Changing Crypto Derivatives Exchange (Exchange)

About

Intro

In this review of FTX, we will take a look at one of the largest growing derivatives exchanges in the crypto space.

In their relatively short time, they have built up a strong reputation in the community, and this is now becoming the go-to exchange for trading both bitcoin and altcoins derivatives with the innovative markets on offer.

So what is it that makes FTX the talk of Crypto Twitter? What makes it stand out amongst the big boys Bitmex and OKex?

We took an in-depth look at the exchange by examining the team, security, fees, platform functionality and asset coverage, among other metrics. If you wish to skip to the summary to see the SWOT analysis, matrix score and rating, click here.

Finally, if you find this review beneficial and wish to start trading on FTX, feel free to sign up and register for trading by clicking here and receive a 5% discount off your trading fees as a bonus!

Proof of Review will receive a small referral credit, which will help us to continue providing reviews like these. Thank you in advance for your support.

Overview

FTX is a cryptocurrency derivatives exchange offering Perpetual and Futures contracts for Bitcoin and Altcoins, leveraged margin trading and several unique derivatives and index markets.

The exchange was launched in mid-2019 and is owned by FTX Trading LTD, an incorporated company in Antigua and Barbuda.

Use case

As derivatives in the space become increasingly important, the FTX platform aims to expand on the main derivative products in the market such as BTC Perpetual and Futures contracts, and allow indexes on Small, Mid and Large Cap Altcoins.

Many market participants from previous cycles understand the risks of holding altcoins, including the correlation with BTC price movements. The new markets offered by FTX allows users to hedge their holdings or get access to several markets via one product.

The unique markets offered on the exchange are the ALT, MID and SHIT perpetual and futures markets available, meaning users can get exposure trading baskets of altcoins via one contract.

For example, the ALT-PERP contract tracks the price of a basket of altcoins, using a weighted average of the prices of BCH, BNB, BSV, EOS, ETH, LEO, LTC, TRX, and XRP. Users can trade long or short on this contract on spot or using margin from 2x to 101x.

Another one of these new products offered are the BULL, BEAR, MOON and DOOM ERC-20 leveraged tokens which seeks a return that corresponds to +/- 3 times the daily performance of the index traded for BULL AND BEAR markets and +/-10 times the daily return of the index traded on MOON and DOOM markets.

History

Based on the operating history of the exchange being under 12 months, we are unable to award any marks to FTX in this section. However, we can say with confidence that this is the most groundbreaking exchange launched since Bitmex in 2015.

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Adoption

FTX does not list the number of users on its exchange; however, this is the norm in the industry. FTX stated several months ago that there had been over 10,000 traders KYC’d on the platform, which gives a good idea of active user numbers as users are required to KYC before depositing and trading on the platform.

To incentivise adoption, FTX implemented a token alongside their exchange, FTT, similar to many other leading exchanges such as Binance, Okex and Huobi. We will talk more about FTT later in the review.

An excellent strategy for adoption amongst traders was the introduction of the Battle Royale trading competition, which had a total prize pool of 120k FTT token. The competition allowed traders to fight it out on the trading leader board for a reward of 40k FTT tokens and the recognition as FTX’s best trader!

Another of the other innovative ways the exchange used this trading competition for adoption was to allow users to stake their FTT on their trader of choice, giving both stakers and staked traders a share of 80k FTT tokens.

A quick look at Etherscan shows only 245 FTT addresses; however, exchange addresses make up around 20-25% of the circulating tokens, so FTT holders are likely storing their coins in exchanges. In the case of exchange tokens, token holding is not a reflection of adoption in comparison to user numbers on the exchange.

Overall, adoption for FTX is highly impressive, and we feel it is only a matter of time before this platform is the market leader for Bitcoin and Altcoin trading. Users will not want to trade elsewhere once they have sampled the markets on FTX.

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Competition

OKEx and BitMex dominate the derivatives exchanges space, but innovation in the industry along with spreading counterparty risk has opened the door for new competitors such as FTX.

With recent daily volumes of over USD 300 million split over Spot and Derivatives markets, FTX is smaller than competitors like BitMEX and Deribit; still, it is making significant advances in catching these market leaders.

There are several unique elements FTX possess that gives them an edge over other competitors aiming to break the monopoly held by the two big players in the derivatives sector. One of these includes the team behind the project, Alameda Research, a $100 million quantitative cryptocurrency trading firm.

Within a year, Alameda Research became the most extensive liquidity provider and market maker in the space. Alameda trades $600 million to 1 billion a day, accounts for roughly 5% of global volume and is ranked 2nd on the BitMEX leaderboard. The team are highly experienced, smart and delivering unique products to the market.

FTX also offers improvements over other platforms such as:

• Perpetual swaps for over 15 assets, whereas BitMEX and Deribit which only provide a handful of markets.
• Tradable indices like an “altcoin index” and leveraged tokens for over 45 assets.
• All contracts are settled in USD value compared to competitors who settle in the traded asset.
• Consultation with its community when considering new trading pairs for listing.
• FTX offers the most innovative markets in the derivatives sector.
• OTC desk via parent company to provide liquidity and therefore minimise the risk of requiring the liquidation fund to socialise losses.

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Coin Listings

Most derivatives and futures exchange, tend to list a handful of coins alongside its BTC base pairs. Not FTX, who make a massive splash into the derivatives market with an outstanding array of listings since their launch.

Along with innovating the markets mentioned above, they have launched several new listings by collaborating with its community along the way. The new upcoming listings mentioned include the ability to trade derivative contracts on real-world instruments linking emerging and legacy financial markets in one platform.

FTX scores a maximum for its innovation in this regard along with new pairs in record times.

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Products/Features

Team

Experience

The FTX team information is listed on their website; however, only two team members have their data available. There is a LinkedIn profile where 11 employees are listed along with their current job role and experience. However, we assume there is a much larger team building in the background as the exchange experiences rapid growth.

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The team behind FTX is an impressive one and headed up by Sam Bankman-Fried, an MIT graduate, who’s trading skill originated from 3-years at Jane Street (a New York based proprietary trading firm) from where he relocated to Hong Kong and co-founded Alameda Research.

Alameda Research trade a range of quantitative strategies, such as statistical arbitrage and market-making. Within 2-years, Alameda has grown to turnover one billion dollars of turnover across 35 exchanges, accounting for somewhere near 5% of global crypto volume.

Alameda founded FTX after discovering inefficiencies in the derivatives markets and incorporated their OTC service into the platform. They were able to bring their backstop liquidity to their platform and allowing for a more efficient trading process and preventing a clawback process otherwise known as ‘socialised losses’.

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Advisors partnerships

Partners for FTX are listed on their website and include the parent company Alameda Research which provides the exchange with its experience, liquidity and contacts in the industry.

Circle (USDC) and TrueUSD (TUSD) are critical strategic partners for the exchange as they allow for settlements to be made in stablecoins based on a USD value. FTX recently announced a partnership with Binance, which is seen as huge news and a sign of the powerhouse that FTX is becoming in the exchange sector.

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Development

FTX is consistent in its development, marketing and adoption with substantial progress in all of these areas since launch.

This is best highlighted in their ability to research new markets, gauge adoption amongst its users and then implement it with precision and efficiency. We award the team top marks for their innovation and speed of development.

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Funding / Expenditure / Revenue

There is no public information around funding for the exchange before the launch. However, there has been a token sale for the FTT token pre-launch of the platform and during the first few weeks post-launch.

Based on the daily trading volume and the trading fees generated, it is clear to see FTX are generating substantial revenues and growing as a business. There are no public financial records; however, this is the norm for exchanges in this industry.

We would typically award FTX full marks here based on their revenues generated and the size of their parent company. However, we feel that they are unable to achieve the bonus point. This is due to the fact we think because FTX raised funds for the FTT token, public investors should have access to a full annual financial report.

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Features

API

There is a public API available free to use, documented in both English and Chinese. This is a nice touch and not seen across many exchanges, giving FTX full marks for the API metric.

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Order Types

The trading platform allows basic and advanced order types, guides for which are documented on their website. Advanced order types include Stop and Take Profit Limit orders, along with Trailing Stop and Take Profit orders.

These order types give the user flexibility to enter and exit positions without having to enter stop or take profit orders manually. There is also an order confirmation before the order is processed, allowing the user to confirm their intention before hitting send. Anyone whos made a trade request in error knows have valuable this is!

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Token Utility

There are several utilities for the FTT token within the exchange ecosystem, allowing users to benefit from holding the token and also trading on the FTX platform to receive discounted trading fees. The only recommendation we can make is extending the FTT token to a utility outside of the exchange ecosystem, for example, paying staff salaries/contractors in FTT tokens or accepting FTT for merchandise such as hoodies.

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Trading Pairs

One of the essential elements of the FTX exchange is the number of trading pairs listed currently and also possible in the future. There are presently 28 base pairs listed for trading, all of which contain an impressive amount of submarkets. Alongside a PERP contract for each base pair, there are futures markets and the BULL, BEAR, MOON and DOOM markets also, giving users a ming boggling number of pairs and markets to trade.

One of the things that make trading simple on FTX, is the user ability to convert any of the listed pairs into collateral to trade on other markets, providing a seamless and pleasant trading experience with no barrier for users to trade on new markets.

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Trading Fees

FTX is offering one of the lowest fee structures across their industry, with their regular Tier 1 trading fees as low as 0.02% for maker fees and 0.07% for taker fees. These are much lower than the industry average of 0.2%, while similar to the taker fees of 0.07% at Bitmex, they are higher than the 0.04% standard taker fee charged over at Binance futures.

Trading fees can also be further reduced based on the volume traded by a user, with the highest Tier offering an appealing 0.01% maker rate and 0.04% taker rate.

FTX, like Binance and many other exchanges, offer a token alongside their exchange to allow for reduced trading fees in return for holding the exchange token. There is a sliding scale for the amount of FTT held by a user and the discount received, with the rates varying from 3% up to a 60% discount on fees.

We give FTX full marks for this metric as their fees across the board are impressive and lower than the industry average, with the option of reducing these via the amount volume traded and even further by holding the FTT token.

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Mobile App

There is also a mobile App available for users on both Android and iOS, and we award a bonus point for this as it allows traders to manage their account on the go. Anyone who has ever traded via a website on mobile knows how vital a dedicated mobile app is, so we award a bonus point to FTX in its UX metric.

Security

Overview

We took a look at the security metrics for the FTX exchange. Although we aim to cover a range of parameters, no cryptocurrency exchange is 100% secure, and users are encouraged to only store funds on exchanges when trading.

Idle funds should always be kept in user wallets.

Mozilla Score

We run all the exchange-websites we review in Mozilla’s Observatory-test. The score in this test is one of many indicators of the exchange’s security.

FTX received a score an impressive B+ rating in this test. Any score over a C grade is seen as above average.

SSL

When visiting any exchange website, users should always verify the SSL certificate on the site before registering. We can see that FTX has a full SSL certificate issued by Cloudflare, who is a well known American web infrastructure and website security company.

2FA

2FA is mandatory for users to deposit funds into FTX to commence trading and users have the option of several ways to add a 2FA to their account, including Google Authenticator and Authy.

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Whitelisting

There is currently the option to set a separate withdrawal password, but no IP or email address whitelisting available for users. This is recommended as an extra layer of security for users.

We also recommend whitelisting withdrawal addresses to prevent funds being transferred to nefarious addresses in the case an account is compromised.

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Audit

We could not find any record of a public security audit of the FTX exchange platform. We also could not find any information published by the team to indicate whether there has been a recent security audit or if they employ a regular audit on their platform. We always recommend that exchanges follow this practice and inform their users if a third party has audited the exchange.

FTX is operated by Alameda Research which is a quantitative trading firm managing over $100 Million in assets and trading over $1 Billion per day across thousands of coins. The team are experienced in managing user funds, and we assume that they conduct audits on customers funds regularly.

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Safety

FTX pride themselves as being a secure exchange with no history of theft from the exchange. A quick google search shows no recorded incidents of theft or hacks on the exchange.

The section on the website about user guides provides little information on how to securely manage their account and funds. We look at Binance as the benchmark for this with its security guides and recommend other exchanges provide a similar guide to ensure their users remain safe.

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Fund Custody

The website states that all assets on FTX are stored in multi-sig cold wallets only. All FTX addresses are multi-sig, and all funds are kept offline. This means even in the event of a system compromise; an attacker still will not have full access to all the required keys to steal funds.

Cold storage of user funds should be mandatory among ALL exchanges and made clear to users on their website

We also recommend that FTX provide a user guide to highlight their plans in case users are unable to log in or the exchange is compromised. We have never come across an exchange which tells its users what the procedures are in case of a hack.

As FTX is a centralised exchange, users do not control their private keys, and as such, all funds deposited on the exchange are in the custody of FTX until withdrawn by the user. We always recommend to users that they only keep funds on exchanges when trading and withdraw funds immediately when not required.

We award one mark in this metric to the team for their use of cold storage; however, we could not find any mention of how often withdrawals are managed and sent and so FTX misses out on an additional mark. The bonus mark in this metric is reserved for decentralised exchanges only where users are in control of their funds at all times.

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Legal

Overview

We took a look at the legal metrics for the exchange; however, we remind all users to undertake their due diligence before registering, depositing and trading on any exchange. Your funds are at risk while held on ANY exchange.

KYC

KYC is mandatory for users once they reach a withdrawal threshold of $1000, after which point the account requires KYC approval.

We see this as a positive as it ensures that the exchange is complying with its requirements as a financial platform. Users are recommended to KYC upon registration and before trading to prevent any delay when requesting a withdrawal. FTX scored a bonus point in this regard due to their partnership with KYC partner Chainalysis to monitor suspicious activity and to avoid money laundering.

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Volumes

FTX is highly transparent with the trading volumes on their exchange, leading the way against its competitors by listing a global leaderboard analysing trading volumes at the top exchanges. This is updated and visible on their website and a fantastic feature.

Again we award FTX full marks for this innovation and transparency on what is a crucial indicator for the exchange sector.

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User Restrictions

Naturally being a futures and derivatives exchange, means that there are restrictions on users from the United States, Canada, China and the usual suspects Iran, North Korea, Syria and Cuba with the policy listed on their website.

In this case restrictions on users from the above countries is a positive, especially from the US, meaning that FTX is not liable to US regulation or breaking sanctions. As such, we award a score of 2 for this metric. The bonus mark is awarded to regulated exchanges, so we are unable to allocate this point to FTX.

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Accounting

Users can download trade history as a CSV file from the lifetime of the account. FTX settlements are made in a USD quoted value, and this assists users significantly for accounting purposes, giving the exchange full marks on this review metric.

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SAFU

There is a listed insurance fund in place for FTX, but in theory, they should never have to use it due to their OTC trading desk. The Insurance Fund comes from liquidations executed with a price better than the bankruptcy price of that position.

One of the unique things about FTX over its competitors is its ability to liquidate positions using its OTC desk and therefore reducing the risk of slippage and the ability to liquidate significant positions quickly in as few orders as possible.

We also recommend exchanges list if they have a Secure Asset Fund for Users (SAFU) in case of exchange hacks. There is not currently a SAFU fund listed for FTX outside of its insurance fund. We can safely assume from its revenues and parent company that FTX has a substantial balance sheet; however, a clear guide on a SAFU would be beneficial for users.

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Misc

FTX recently dismissed claims of a legal suit against itself and parent company, stating that they have not been served with any legal notice, so we do not currently see this as a concern for FTX.

Community

Overview

We take a look at the community engagement for the exchange, often one of the most overlooked criteria when deciding on whether to use an exchange or not. Customer support is essential to users, along with regular communication on developments.

Communication

The main channels of communication are the Telegram and WeChat channels, allowing for two way engagement with the community. There is also a blog providing updates around the project and a Youtube channel with videos on how to use the platform and live trading sessions with the FTX CEO and team.

We recommend migrating from Telegram to Discord as it allows for better organisation of channels, and the ability to add multiple language channels in one platform, often adding a live chat avenue for users who require instant support.

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Engagement

There has been an organic growth to the FTX community, assisted both by its innovative products and also its trading competition, the Battle Royale.

According to RivalIQ, the average Twitter engagement on the FTX account is 37.4 per tweet, which is 0.67% of its total 5560 follower audience

At a rate of 37.4 engagement total per tweet, this is over five times higher than the average engagement rate across all industries. The engagement rate per tweet is around 14 times higher than the industry average.

Both highly impressive and shows the community are engaged with FTX’s social media presence.

We can recommend that FTX improve their engagement with their community with a dedicated social media content creator to engage its large following of over 5000 followers. We also recommend making the trading competitions a regular occurrence as community engagement follows.

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Website

The website provides detailed information about FTX and is easy to navigate, but we can recommend more information around the team is visible on their website. The site is secured via HTTPS; however, it is not GDPR compliant, and the domain details are not public.

The website and platform are multilingual in over 10 languages including English, Mandarin, Korean, Japanese and Russian. We score two marks for FTX here, but we would like to see the GDPR compliance installed for European users.

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Support

There are several options for user support with a Live Chat and email available for users on the website. We can recommend that FTX makes the support channels more easily visible on the site. Users who require urgent support can often panic, and ease of contacting support is essential.

FTX state that they operate a 24/7 support service and aim to respond within 1 hour during working hours. The team advise that support is multilingual; however, there is no information offered on which languages are supported. We also recommend that as the exchange grows, they provide dedicated 24/7 dedicated support channel for security issues.

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Trading Experience

Overview

In this video, we take a look at the trading experience for the exchange; however, we remind all users to undertake their due diligence before registering, depositing and trading at any exchange. Users have little or no legal recourse in the event of funds lost on exchanges through mismanagement.

Summary

Conclusion

Breakdown

This review is for educational/informative purposes only.

You should not construe any such information from this review as any legal, investment or financial advice.

Methodology

We use a combined rating score out of 100, covering all the listed metrics for project reviews. Each parameter is rated out of 3, including a potential bonus point in every metric.

We also reserve the right to award a bonus point for outstanding achievement for a project for any metric. Our rating methodology is listed here.

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