FTX.US, the U.S. affiliate of cryptocurrency exchange upstart FTX, announced on Wednesday it closed its first funding round with an $8 billion valuation, reaching unicorn status at a time when cryptocurrencies are being roiled by risk aversion.
The platform, which has vaulted from obscurity to one of the biggest names in the competitive cryptocurrency exchange segment, raised $400 million from crypto-native firms such as Paradigm and Multicoin Capital, plus traditional names like Singapore-based Temasek, SoftBank, and the Ontario Teachers’ Pension Plan Board.
FTX.US becomes the latest unicorn in a sector that’s exploded over the past year as cryptocurrencies vaulted up their charts. Still, 2022 has gotten off to a volatile start, with Bitcoin (BTC-USD) shaving off roughly half its value since hitting a record above $68,000.
“The raise is a testament to the explosive growth we’ve had over the past year,” said Brett Harrison, president of FTX.US.
FTX clocked record growth in 2021. It's launched its own non-fungible tokens (NFT) marketplace, and a sports advertising campaign worth hundreds of millions. Its roster of celebrity spokespeople include Tampa Bay Buccaneers star quarterback Tom Brady, fashion model Gisele Bundchen and Shark Tank’s Kevin O’Leary.
Cryptocurrency exchanges are central hubs the crypto sector's activity. They garner the ecosystem’s highest level of transaction flows, the majority of which comes from trading, and reap profits by charging transaction fees.
FTX is positioned close to the top of the cryptocurrency exchange league tables below the industry’s largest behemoths such as Coinbase and Binance, but has risen fast thanks to its robust liquidity access.
The U.S. affiliate grew its average daily transaction volume by 608% over the last year, reaching a peak of $812 million in early November, two days after BTC reached its all-time high. For the same period, its user count rose from 10,000 to 1.2 million.
One of the firm’s other critical moves includes finalizing the acquisition of the CFTC-regulated derivatives exchange and clearing house, LedgerX, in late October.
In the volatile crypto markets, derivatives contracts make up the bulk of global cryptocurrency trading volume, but less than 3% comes from the U.S. That’s because gaining a license necessary to offer derivatives products to U.S. investors is highly regulated, and can take up to 5 years according to Harrison.
“There's enormous institutional and retail demand for these products in the U.S.," Harrison told Yahoo Finance. "The fact that we are on the road to being able to offer them in the U.S., hopefully this year, means that we have enormous potential to fill this niche in the largest capital markets in the world."
Now rebranded as FTX Derivatives, the platform must work with the CFTC to gain approval on their margin and clearing risk models, as well as the actual derivatives products they plan to offer, before implementing the service line on their platform.
While FTX has a lead, the race to offer risk-heavy crypto derivatives first to U.S. investors isn’t over. In December Crypto.com announced their acquisition of North American Derivatives Exchange (Nadex). In January Coinbase bought the platform, FairX.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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