For many basketball fans, FTX Exchange and his owner, Sam Bankman-Fried (hereinafter referred to as SBF), are names that have only recently become familiar. Just this March, FTX signed a 19-year agreement with the NBA affiliate Heat for the stadium’s title rights. Starting next season, the American Airlines Arena will be renamed FTX Arena. However, the big names of SBF and FTX have long been known to participants in the crypto market. According to Bloomberg, FTX has become the fourth largest cryptocurrency exchange in the world, with partners across different sectors such as market makers, exchanges, public chains, and decentralized exchanges. Now, let’s get to know SBF and his FTX together.
A trader’s paradise
FTX was founded in May 2019, which is only 2 years ago. However, the market environment when FTX was first built was not an ideal moment. At that time, the crypto market had just come out of the lowest point of the last bear market, and the market had entered a small bull market before BTC was halved. But the exchange industry landscape was primed. “HBO (Coinan, Hotcoin, OKEx) + Coinbase” became the head platform of the global crypto exchange industry, and the competition between second and third tier exchanges was extremely fierce.
FTX has been able to go from being surrounded by strong players to being the fourth largest cryptocurrency exchange in the world today, with a total volume of $400 billion in April and an average daily volume of over $14 billion, so it must have its unique means of attracting fans.
When talking about FTX’s vision, SBF has said, “We do everything we can to incorporate the full range of assets into our trading products so that FTX can offer any product that users want to trade.” In other words, what FTX wants to create is a trader’s paradise for every trader who comes to FTX.
In order to achieve such a vision, FTX behind the professional as well as international management team is a credit to. The owner, SBF, graduated from the Massachusetts Institute of Technology (MIT) Physics Department, and then joined the well-known Wall Street quantitative trading firm Jane Street as a trader, a deep understanding of the financial market of various products naturally.
Its management team is also mainly from Jane Street, UBS, Deutsche Bank, BlackRock, Google and other financial or technology companies, with a deep background in trading, risk control, product development, etc., and a deep understanding of all kinds of financial derivatives and rich experience in technology development. Just this May, FTX hired Jonathan Cheesman, former head of foreign exchange sales at HSBC, and Brett Harrison, senior technology executive at Citadel Securities, to fill key positions in the company to further strengthen the company’s management team.
It is with such a team of executives with extensive financial experience that FTX has been able to continue to introduce innovative crypto trading products, bringing more cutting-edge, innovative elements to the overall crypto market to meet the needs of different traders. Mike Novogratz, founder of the crypto investment banking giant Galaxy Digital, has described FTX as “the most innovative exchange”.
Currently, the FTX exchange has an extensive and complete product line, with options, volatility products, leveraged tokens, prediction markets, equity pass-throughs and other financial derivatives and spot leveraged lending products, in addition to spot and futures contracts, which are popular trading products. From this product line, FTX can be said to have led the development of the crypto secondary market in the past two years, with most of the derivatives being the first in the market or launched ahead of most exchanges, providing investors with a variety of investment tools.
The recent market trend of no-blowout leveraged tokens, hybrid margin contracts and USD stablecoin wallets were first introduced to the market by FTX and then copied by other exchanges after being recognized by investors. Through leveraged token trading, users can trade long/short with 3x leverage without the need for margin. Mixed margin contract trading eliminates the inconvenience of users depositing margin in different currencies, and by default, users use the same margin pool for all positions. In addition, FTX allows users to deposit a variety of compliant USD stable coins such as USDC, TUSD, PAX, BUSD and HUSD into its USD Wallet for replenishment and 1:1 conversion to USD. When the above-mentioned stable coins are deposited into the wallet, FTX will automatically identify and deposit into the FTX USD Stable Coin Wallet.
In terms of equity pass-throughs, FTX introduces popular US stocks to the crypto market, allowing users to participate in trading popular US stocks on a 7*24 full time basis, while also attracting US stock users to the cryptocurrency market, which makes FTX the most important exchange for equity pass-through products.
The prediction class market has been called the potential next windfall in the crypto world by V-God, and FTX is the first leader among centralized exchanges to open up this market. The emergence of prediction-based markets not only allows users to participate in the discussion of major public events and gain earlier insight into the movement of major events, but also the opportunity to participate in them. During the 2020 U.S. presidential election, FTX’s Trump contract prediction product received a lot of attention from the market and became an effective tool for public opinion.
The launch of more specialized derivatives such as options and volatility contracts (MOVE) demonstrates FTX’s expertise in product development. While most of these instruments are more frequently used by institutional investors, these specialized tools are becoming increasingly popular with general investors as investor education is promoted.
In addition, FTX’s coin upload speed in the industry is one of the best, mainstream or popular concept coins can be found on the platform. The platform also opened a special platform coin index contract trading (index contracts include BNB, HT, OKB, LEO, and FTT), catching individual coins up and down is very difficult, and even catching is also very tossed. The index contract is the perfect solution to the pain point of lying down and trading.
No downtime at critical times
The core factor in determining whether an exchange is reliable is its security. Whether the exchange has enough technical and equipment support to ensure that it does not go down under extreme market conditions is a very important security factor.
The volatility of the crypto market is often very violent, and the problem of exchange downtime under extreme circumstances has been a problem that has plagued the industry for years. In the current round of 5.19 crash, various mainstream exchanges such as Coinan, Coinbase, Gemini, and even crypto bank Revolut were down, while FTX was running smoothly without any downtime and the overall blowout rate was extremely low. The following is the 5.19 downtime situation of the mainstream exchanges in the market crash, FTX is not included in this list, as compiled by the tweeter @Mr.Whale.
According to the contract data from the crypto data platform Skew, on 5.19, the volume of contracts traded on the whole network was $241 billion, with FTX accounting for $14 billion, or 5.8%, but the liquidation rate was only 2% of the total amount cleared on the whole network. In comparison, we know the “big three” in the crash during the liquidation rate is not low.
In terms of clearing mechanisms, crypto market users often add another layer of potential risk compared to investors in traditional financial markets. Most crypto derivatives trading platforms use a sharing mechanism in the event of increased market volatility and a significant loss on a break-through position. FTX uses a “three-tier clearing model” to minimize the apportionment of losses and to ensure the profitability of users.
First, FTX will also monitor user positions and their margin rates in real time. However, unlike other platforms, FTX will be in the user’s margin rate below the maintenance margin rate, send a limited frequency liquidation orders to close out positions below the margin, so that the FTX platform on the maximum strong close position will be reduced with the increase in the number of liquidation orders. That is, FTX will not be liquidated too quickly in a short period of time to prevent market volatility or even collapse due to large liquidation orders.
Once the market is massively volatile, FTX order book in the normal liquidation of orders may not be able to close positions in a timely manner, FTX’s liquidity support procedures begin to start. In this case, the liquidity union will automatically intervene in the risk of bankruptcy (burst) accounts, take over the entire position, the position through the risk of position removal. In this way, in an emergency, through the operation of the liquidity provider, FTX can quickly inject liquidity, to achieve the rapid processing of the positions of accounts at risk of liquidity, to prevent bankruptcy and the emergence of positions become negative assets.
Finally, FTX has a risk protection fund can pay the platform due to losses incurred through the position. But the most important thing here is the role of liquidity providers. Because even through the risk guarantee can pay a large position (such as hundreds of millions of dollars) of the net loss, but if the position is not liquidated, once the market continues to decline rapidly, the risk guarantee is not always paid. So the liquidity provider plays the role of a guarantor here, and by liquidating the position in a timely manner, it can solve the problem that the risk protection fund cannot solve.
By doing the above, FTX greatly reduces the possibility of triggering the apportionment mechanism. Currently, on the FTX even a 40% market movement in 20 minutes is not enough to trigger the apportionment.
A snapshot of changing times
Objectively speaking, FTX can appear so rapidly soaring, can not be separated from the global macroeconomic changes and the rapid development of the industry. The crypto market is undoubtedly the new growth point in the financial market in the future, and if many people were reluctant to admit this before 2020, it has become a consensus with many traditional financial institutions and real companies entering the crypto market in a big way.
As SBF said when it first entered the crypto market, “Compared to the traditional financial market, the cryptocurrency market is still in its early days and not mature enough, and there are many opportunities to do secondary quantitative trading, so here I am.” Although times have changed, the crypto market undoubtedly still holds great opportunities for growth in the context of institutional entry, and the multi-category trading and secure trading system offered by FTX will undoubtedly attract more trading enthusiasts to enter the crypto market. In this regard, FTX has become a bridge between the emerging and traditional markets.
In addition, as a representative of “New Money”, FTX is also showing its influence to the traditional world with a confident and positive mindset.
In May this year, FTX and the NBA’s Heat team signed a stadium title agreement, with a price of $135 million to buy out the Heat’s home stadium title for the next 19 years. From next season, the NBA broadcast will appear FTX arena images. As soon as the news came out, some American media were worried that a crypto company just two years old could really sign the title of the Heat’s arena for the next 19 years? In response, SBF simply said in a slightly vanilla tone, “This is still a good year, we just don’t have to wait another 18 years to pay off this sponsorship.”
From the American Airlines Arena to the FTX Arena, fans (or the general public) just remember a name change, but if you look at it 19 years later, it could be a sign of the times. It’s not that the traditional industrial division of labor is no longer important, it’s just that the ranking of core technologies and social collaboration methods has changed in different eras.
Whether or not the crypto industry can rise in this way requires a combination of many variables, but from the full-page ad in Wall Street Journal by Grayscale Fund and FTX’s dome sponsorship of the Heat, we can feel the power of this industry slowly building up. The chasm between the crypto market and the mainstream is slowly narrowing in the post-epidemic era, and FTX is becoming an important representative of the spillover of the crypto market’s influence.
The Logo of FTX
If FTX is going to be the symbol of the transition era, then SBF is the symbol of FTX.
Most cryptocurrency users still know SBF from the photo of him lying asleep on the lazy couch in his office. But if you really see SBF for the first time, it may be hard to believe that this is a financial tycoon who is worth tens of billions of dollars. With his short fluffy, curly hair, easy smile, and perennial T-shirt and shorts getup he seems to be a programmer coming out of any IT company.
Since leaving Wall Street to enter the cryptocurrency world in September 2017, SBF first founded the crypto market maker Alameda Research, and then established the crypto exchange FTX, and after the success of FTX took hold SBF stepped up his investment pace: Solana public chain, decentralized exchange Serum Dex, $150 million acquisition of crypto asset management tool Blockfolio, all of which he is proud of. The seemingly “unassuming” big boy is on his way to becoming an icon, building his own crypto empire in the cryptocurrency world.
Even with all this success, SBF seems to maintain a “hard times” style of work, at least as far as the FTX office employees are concerned, none of them seem to see their boss home.
In the 7*24 crypto market, it is absolutely important to be sensitive and alert to the market at all times. SBF has explained that his brain is like a computer with a lot of memory (RAM) but only a small amount of hard drive storage, and that staying in the office ensures that he can get back to work quickly because he doesn’t really “shut down” and the RAM doesn’t need to be restarted.
If you want to find out why SBF works so hard, you may have to trace his “altruism”.
Perhaps because he grew up with a lot of public service ideas and was exposed to the Effective Altruism movement during his time at MIT, SBF believes that “Earning to Give” is a form of justice. Working hard and giving more money to provide the greatest happiness to the greatest number of people became the root of SBF’s altruistic beliefs. It is for this reason that he will donate 50% of his income to organizations working on animal welfare and the potential threat of artificial intelligence.
SBF’s uncompromising work and altruism are both distinctive spiritual labels that have influenced and guided the direction of FTX, and are the spiritual foundation of their success in the crypto world.
The development of FTX in the past two years has shown us the best path for an innovative crypto asset exchange. The capital market will always experience highs and lows, and the market will always experience bulls and bears, but companies that persist in innovation and continue to innovate will definitely reap the rewards of the historical process. We look forward to SBF and his FTX continuing to bring more innovative elements to the market in the future, and wish them well as they continue to grow in this emerging industry.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/ftx-no-downtime-at-critical-times-creating-a-traders-paradise/
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