The Record-Breaking Funding Round
On July 21st, cryptocurrency exchange FTX announced the completion of its $900 million Series B funding round. This landmark investment included participation from over 60 investors such as Sequoia Capital, SoftBank, Ribbit Capital, Paul Tudor Jones' family office, Coinbase Ventures, and Paradigm. The post-money valuation reached an astounding $18 billion, setting a new industry record for the largest single funding round.
In a related development, Forbes reported in an interview with Changpeng Zhao (CZ) that Binance no longer holds any FTX shares.
FTX's Meteoric Rise
Founded in May 2019, FTX achieved its remarkable journey from zero to $18 billion valuation in just over two years. With this $900 million infusion, the question now becomes: What's next for FTX? And why has Binance divested its FTX holdings?
Breaking Through Industry Barriers
The cryptocurrency world remains relatively small compared to the vast financial markets. When Sam Bankman-Fried (SBF), with his MIT and Wall Street pedigree, entered the exchange space, it signaled the beginning of Wall Street professionals making their mark in the traditional crypto sphere.
While numerous cryptocurrency exchanges were competing over altcoins and token models in 2019, FTX charted a different course from inception—focusing on product innovation to drive market growth.
Key differentiators that set FTX apart:
- Index contracts tracking baskets of tokens (including altcoin indices and China-focused Dragon indices)
- Tokenized stocks like Tesla
- Leveraged tokens
- Prediction markets for events like US elections
These innovative products allowed FTX to escape the highly homogenized competitive landscape and carve out its niche through derivatives.
FTX has also aggressively pursued mainstream marketing strategies:
- Sponsorship deals including NBA's Miami Heat arena
- Partnerships with esports team TSM
- Collaborations with Major League Baseball (MLB)
All these efforts demonstrate FTX's commitment to breaking cryptocurrency's niche boundaries and attracting mainstream investors.
Strategic Use of New Capital
In interviews with Bloomberg and Forbes, SBF outlined two primary uses for the new funding:
- Developing strategic partnerships to accelerate FTX's growth
Fueling acquisitions that could include:
- Non-crypto companies
- Trading shops
- NFT platforms
- Potential targets valued between $5 million and $1 billion
This follows FTX's 2020 acquisition of cryptocurrency portfolio management app Blockfolio for $150 million. The vision positions FTX not merely as a cryptocurrency exchange but as a financial services group built around exchange operations—similar to Coinbase's evolution.
With numerous equity investors now onboard, FTX's path to public markets appears increasingly likely. In July, SBF told The Information that FTX was considering going public, potentially through a direct listing. He also revealed significant metrics: "We're the third largest platform globally with daily trading volume of $10 billion. Last year our trading volume grew about 30x."
Binance's Divestment from FTX
Concurrent with FTX's funding announcement came news that Binance had completely exited its FTX equity position.
CZ explained the divestment as part of the normal investment cycle, stating: "We saw their tremendous growth, which we're very satisfied with, but we've completely exited. We remain friends, but we no longer have any equity relationship."
Binance had made an undisclosed strategic investment in FTX in December 2019.
Why Did Binance Exit?
Several factors likely contributed to Binance's decision:
- Sequoia Capital's Involvement: The appearance of Binance's former adversary Sequoia Capital in FTX's investor list may have influenced the decision. The history between Binance and Sequoia includes legal disputes in 2017-2018 over financing terms.
Competitive Dynamics: While FTX and Binance maintained a cooperative relationship, underlying tensions existed:
- In March 2020, Binance delisted FTX's leveraged tokens citing user protection concerns
- In May 2020, Binance launched its own leveraged token products
- In April 2021, SBF commented publicly about Binance's equity token offerings
- Regulatory Considerations: Binance faces increasing regulatory scrutiny globally, while FTX positions itself as working more closely with regulators.
Despite the equity divestment, Binance still holds FTX's native token (FTT), maintaining some connection between the two exchanges.
Inside FTX's Operational Excellence
SBF has become one of cryptocurrency's most prominent figures, building an impressive empire that spans:
- Alameda Research (founded 2017)
- FTX exchange (2019)
- Solana ecosystem development (2020)
Diverse operations including:
- Primary market investments
- Secondary market trading
- Fund LP activities
- Public chain development
- Mining arbitrage
- OTC services
Customer-Focused Culture
Beyond the strategic moves, FTX's operational excellence shines through in customer experiences:
- Rapid Listing Process: While other exchanges quoted 4-5 months for token listings, FTX completed one in just four days after being approached.
- Responsive Engineering: When a user reported a minor UI issue, FTX's engineering lead fixed it within 24 hours.
Customer-Centric Trading: Traders appreciate:
- Flexible order systems allowing modifications without cancellations
- OTC desk support preventing unnecessary liquidations
Leadership and Team
SBF's leadership style sets FTX apart:
- Hands-on engagement, even responding to small account holders on Twitter
- Legendary work ethic (including viral images of him sleeping in the office)
- Building a culture that combines Wall Street professionalism with crypto innovation
Industry professionals consistently praise FTX's team responsiveness and technical capabilities. As one trader noted: "FTX is my favorite CEX so far—their flexible order system is exceptional, though some trading pairs lack liquidity."
The Future Trajectory
FTX's journey reflects the rapid evolution possible in cryptocurrency. SBF's rise from being turned away during a 2019 China visit to heading an $18 billion company illustrates the industry's potential for meteoric success.
Key takeaways about FTX's position:
- Currently ranked third globally by trading volume
- Strong derivatives focus complements Binance's spot market dominance
- Aggressive acquisition strategy poised to accelerate expansion
- Public listing appears increasingly likely as exit path for investors
As FTX continues breaking barriers between crypto and traditional finance, its evolution into a comprehensive financial services provider seems inevitable. The $900 million funding round marks not an endpoint, but rather a launching pad for FTX's next phase of growth.
FAQ Section
Q: What makes FTX different from other cryptocurrency exchanges?
A: FTX distinguishes itself through innovative financial products like index contracts, tokenized stocks, and prediction markets, combined with a strong focus on derivatives trading. Its leadership's Wall Street background also brings professional trading expertise to the crypto space.
Q: Why did Binance sell its FTX shares?
A: Binance's divestment appears driven by several factors: the involvement of its former adversary Sequoia Capital as an FTX investor, natural investment cycle progression, and increasing competitive dynamics between the two exchanges despite their cooperative history.
Q: What will FTX do with the $900 million funding?
A: FTX plans to use the capital for strategic partnerships and acquisitions, potentially targeting companies valued between $5 million and $1 billion across crypto and traditional finance sectors. This follows their 2020 acquisition of Blockfolio for $150 million.
Q: Is FTX planning to go public?
A: Yes, SBF has indicated FTX is considering going public, potentially through a direct listing. This would provide an exit path for its numerous equity investors while raising FTX's mainstream profile.
Q: How fast is FTX growing?
A: According to SBF, FTX saw its trading volume grow approximately 30x in 2020, reaching $10 billion in daily trading volume and becoming the third-largest global platform by volume.