FTT is the utility token for the big international crypto derivatives exchange, FTX, which has attracted a lot of attention recently. FTX customers can use the token to reduce fees and earn interest. But if you’re not an FTX customer, does it make sense to buy the coin? Here are some things to bear in mind.
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1. FTX.US (FTX’s U.S. exchange) has a limited product range
Derivatives are complex financial instruments that essentially allow traders to bet on whether the price of an asset will go up or down. Derivatives can also be used to leverage trades — multiplying both gains and losses.
At time of writing, CoinMarketCap put FTX as the third biggest global cryptocurrency exchange in terms of trading volume. It offers several crypto derivatives products, including leveraged tokens, which allow investors to use leverage without the complications of full margin trading.
FTX can’t offer all its products in the U.S. because of stricter regulation. It operates a separate site called FTX.US for American customers — but it might be able to broaden its U.S. offer soon.
2. It recently acquired a derivatives firm that’s licensed in the U.S.
FTX has made some big announcements in the past few months, including the closure of a $900 million funding round. Shark Tank judge and well-known entrepreneur Kevin O’Leary also agreed to become an FTX spokesperson.
And FTX will acquire LedgerX, a derivatives company that’s regulated by the CTFC to operate in the U.S. The company hopes the acquisition will help it establish a stronger position in the U.S. By buying a company that is already licensed, FTX believes it can bring its experience in international crypto derivatives trading to the U.S. market, giving it an advantage over leading exchanges like Coinbase or Gemini.
3. It has an experienced team with a great reputation
One big selling point for FTX is the talented people behind it. Cofounder and CEO Sam Bankman-Fried is well known in the crypto industry, not least because of the success of FTX and the other company he cofounded, quantitative trading firm Alameda Research.
Fun fact: Sam Bankman-Fried played a key role in rescuing the decentralized exchange (DEX) SushiSwap when it tripped on the start line. SushiSwap’s chief developer, Chef Nomi, cashed out about $14 million worth of tokens less than a week after the launch, prompting fears the project had been a scam. Bankman-Fried stepped in, temporarily taking control before setting up a group (elected on Twitter) to jointly hold the SushiSwap keys.
4. Increased regulation could be problematic
There’s a lot of talk about crypto regulation in many countries around the world. In the U.S., authorities are concerned about the way crypto exchanges work, the lack of investor protection and controls in decentralized finance (DeFi), and the role of cryptocurrencies in general.
We know that increased regulation is coming. But we don’t know what form it will take, or how it might impact existing regulated businesses like LedgerX. If the U.S. clamps down on all crypto derivatives trading, that could put a dent in FTX’s U.S. ambitions.
However, FTX is serious about compliance. Bankman-Fried has repeatedly stressed that FTX is committed to staying on the right side of regulation. He believes it is important for the crypto world to work with regulators rather than treating them as the enemy.
5. FTT is not available from major U.S. exchanges
The FTT token is not listed on top cryptocurrency exchanges in the U.S. In fact, according to FTX’s website, U.S. residents are not allowed to trade FTT tokens. This may change as FTX beefs up its U.S. offer, but right now it is difficult for Americans to buy FTT.
6. The price is up over 1,000% this year
Like many cryptocurrencies, the price of FTT has risen considerably since the start of this year. On Jan. 1, 2021 FTT cost $5.77 — and it is now trading at over $60. The token has made a considerable jump in the past few months. The price has more than doubled since the start of July.
The challenge with the wild price swings in cryptocurrency is that it’s almost impossible to predict whether a coin will continue to gain in value, or whether a big price jump means it is about to fall again. It certainly doesn’t make sense to buy in the hope of another 1,000% return in the short term. But if you live outside the U.S. and want to buy, first look at FTT’s fundamentals to decide if you think it makes a good long-term investment.
If you do buy, make sure you only spend money you can afford to lose. All cryptocurrency investments are risky, and there are a lot of things we don’t know about how this market will evolve. The idea of high returns is tempting, but there’s also the risk the value of your investment could fall to zero.
