FTX is a cryptocurrency exchange that specializes in derivatives and leveraged trading. It offers a variety of trading options that cater to both professional traders and beginners. If you’re familiar with the exchange, you may have heard about the native exchange token. Even if you have, you might be wondering the same thing many investors ask, “what is FTX Token?”. FTX Token (FTT) is the exchange token of the FTX platform and plays several roles throughout the FTX ecosystem. Notably, FTX Token gives holders trading fee discounts, rebates, and access to token launch events. Furthermore, the FTX Stocks service of the United States-based subsidiary, FTX.US, provides zero-commission tokenized stock trading, giving crypto investors exposure to a range of traditional assets.
In this “What is FTX Token?” article, we’re going to dive deep into the FTX exchange and the native FTX Token (FTT). We break down the fundamentals of derivatives trading and provide an overview of popular derivatives products. Also, we discuss the various products and services the FTX platform offers. In addition, we’re going to explore the various use cases for FTX Token, FTX NFTs, FTX US, and FTX Stocks.
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What are Derivatives?
Before we dive into the FTX exchange and answer questions such as “what is FTX Token?”, let’s first look at derivatives. Derivatives are a type of financial contract found on exchanges that get their value from an underlying asset or group of assets. Derivatives contracts can facilitate trades for any number of assets.
Furthermore, derivatives come in several forms. This includes futures contracts, forwards, options, and swaps. The prices for these financial instruments are derived from other instruments such as stocks. Also, derivatives give investors access to new markets and enable them to hedge against risk. For example, investors can purchase derivatives that derive their price from weather conditions.
Most derivatives products use leverage. Leverage is a way of borrowing capital for a trading position to maximize profits. However, leverage is inherently risky. For example, a leveraged trading position of 10x would enable a trader to make ten times the profits they usually would on any given trade. So, if the price of an asset goes up 10%, a trading position could make 100% profit with 10x leverage.
However, the same works in reverse. If you open a long position with 10x leverage and the price of the underlying asset falls by 10%, this equates to a 100% loss. Below, we take a closer look at the most popular types of derivatives contracts.
Futures
Futures contracts are agreements between two parties for the purchase and delivery of an asset at a future date for a predetermined price. Also, futures are a common tool among traders for hedging risk and speculating on a broad range of assets. Each party that enters the agreement commits to fulfilling its obligation to buy or sell an underlying asset.
Furthermore, some futures contracts are settled without selling an underlying asset when a contract expires. Instead, several derivatives contracts are cash-settled. This enables traders to account for futures contracts as cash flow.
Forwards
Forwards contracts work much like futures contracts. However, forwards are generally not available on exchanges. Instead, these contracts are available via OTC desks. This enables buyers and sellers to customize the terms of each contract. However, forwards also expose both parties to greater counterparty risk. This is because parties can offset forward positions with other counterparties. Accordingly, more traders have a vested interest in the same contract.
Swaps
Swaps are a type of derivative that enable investors to exchange cash flows. An example of this is an interest rate swap. Interest rate swaps allow investors to jump between a variable interest rate loan and a fixed-rate loan. Also, swaps are used for assisting in cash flow and other business activities such as swapping rate risks and avoiding loan defaults. Unfortunately, swaps became so popular among investors that they became a major contributor to the 2008 financial crisis. This was largely due to high-risk swaps relating to mortgage bonds.
Options
Options work in a similar way to futures contracts. Two parties agree to sell assets at an agreed price at a specified future date. However, traders who hold options contracts have no obligation to buy or sell underlying assets. Options traders still have the option to buy or sell (hence the name), but they are not required to do so.
Furthermore, different exchanges offer various kinds of options contracts. For example, traders can only execute European options on the day they expire. However, traders can sell American options at any point up to the time of expiration. American options feature commonly in ETFs, while equity indices often feature European-style options.
What is FTX?
Before we address the question of “what is FTX Token?” let’s take a look at the FTX exchange. FTX is a Bahamas-based centralized cryptocurrency exchange. It provides a broad range of advanced trading tools, including leverage, derivatives, options, volatility products, and leveraged tokens. The FTX exchange was established in 2018 by Sam Bankman-Fried. The platform supports nine different fiat currency deposits and offers more than 100 crypto trading pairs with a variety of order types to suit beginners and professional traders alike. This includes everything from basic market orders to nuanced, custom trailing stop orders.
Furthermore, the FTX exchange boasts competitive trading fees for spot and futures markets. These fees range from around 0.04% to 0.07% for market takers. Also, the platform waives most crypto deposit and withdrawal fees. In addition, the FTX self-service non-fungible token (NFT) marketplace has a flat fee of one dollar per listing. Plus, sellers gain a 2% commission on each sale.
FTX Products
FTX is known by many as one of the leading cryptocurrency exchanges. It has a diverse product offering that caters to traders and investors of all kinds. Below, we take a closer look at some of the core products and services the platform has to offer.
Futures: FTX offers a range of futures offerings. Traders can go long and short on top crypto assets. Also, the exchange offers more than 100 quarterly and perpetual futures pairs with leverage of up to 101x. Plus, traders can use stablecoins as collateral. Alternatively, traders can use the native FTX Token as collateral and receive favorable rates.
Spot: The FTX spot trading markets give traders exposure to more than 100 cryptocurrency trading pairs with deep liquidity. This includes Bitcoin, Ethereum, Tether, Cardano, and several other prominent crypto assets.
Leveraged Tokens: FTX leveraged tokens are Ethereum ERC-20 tokens that give users 3x leverage on a range of underlying trading pairs. For example, if the price of Bitcoin (BTC) increases by 10%, holders of a BULL/USD 3x long Bitcoin token would see gains of 30%. Furthermore, the tokens have zero margin requirements.
Options: Options traders can speculate on the future price of various cryptocurrencies. Also, they can hedge against positions using various call and put options. This enables traders to buy/sell at a future stock price.
Volatility: The FTX "move" contracts offer an interesting spin on volatility trading by enabling traders to speculate on the percentage by which a crypto asset moves over time, regardless of the direction in which it moves.
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What is FTX Token (FTT)?
So, what is FTX Token? FTX Token (FTT) is the native cryptocurrency of the FTX ecosystem. It is a multi-utility token that gives holders trading discounts on the FTX exchange and serves as collateral for futures positions. Holders can get a discount on trading fees of up to 60% on the FTX exchange via weekly fee rebates. Also, FTX Token holders get the chance to win weekly "Serum" (SRM) token airdrops.
Furthermore, FTX Token uses a “buy and burn” mechanism to reduce the circulating supply. Each week, 33% of all trading fees on the FTX exchange are repurchased, along with 10% of “socialized gains” and 5% of other service fees. At the time of writing, the circulating supply of FTX Tokens is 260.356 million out of a maximum of 332.173 million. According to CoinGecko, FTX Token is trading at around $29.34 with a market cap of $4 billion.
FTX Token holders can stake their tokens to receive up to a 40% referral bonus increase, a relative airdrop increase of up to 14%, and up to six tickets to participate in token launch events. Also, those who stake can receive lower "taker" fees and "maker" rebates. Another benefit of staking FTX Token is receiving reduced withdrawal fees.
FTX US
FTX US is a digital currency exchange operating in the United States. It is regulated by the Commodity Futures Trading Commission (CFTC) and is available to retail and institutional investors who are outside of the jurisdiction of the regular FTX exchange. Also, FTX US provides physical settlements of trading contracts, algorithmic trading, and block trading. The platform operates around the clock and serves customers seven days a week.
The FTX US exchange offers more than 60 cryptocurrency trading pairs, over-the-counter (OTC) trading, a crypto-fiat payment service, and the FTX crypto debit card. Also, the platform boasts top-level security features and market-leading liquidity.
FTX Stocks
FTX Stocks is a zero-commission stocks trading service and a subsidiary of FTX. It gives investors access to tokenized stocks and is regulated by Canco GmbH (FTX Switzerland), an authorized financial intermediary. Users must have completed "know your customer" (KYC) compliance up to level two and reside in one of FTX's permitted jurisdictions.
Furthermore, FTX Stocks tokens are backed by underlying shares held by FTX Switzerland. These underlying shares are redeemable by users. Also, FTX plans to make stocks withdrawable in the future. Plus, users can take out futures contracts on tokenized stocks.
FTX Non-Fungible Tokens (NFTs)
FTX US has a non-fungible token (NFT) marketplace that enables users to buy, sell, and list NFTs directly on the exchange. Users can browse for collections by their favorite NFT artists. Plus, investors can see what pieces are trending and most popular.
Also, FTX is collaborating with the Mercedes AMG Petronas F1 team to create the Mercedes AMG-F1 NFT range. Working in collaboration with NFT artist Mad Dog Jones, FTX has created an exclusive NFT range for fans of the racing team. In addition, a life-size replica has been created for a one-off auction.
What is FTX Token? - Summary
FTX is a leading provider of cryptocurrency derivatives products. Both FTX and FTX US are available for web and mobile on Android and iOS. With a sleek, intuitive user interface and a variety of trading options, FTX appeals to beginners and professionals alike. Furthermore, the native FTX Token (FTT) provides holders with trading discounts and various perks.
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