FTX, a cryptocurrency exchange, has a market capitalization of $32 billion, despite bear market fears.
- FTX, a crypto exchange situated in the Bahamas, has announced that it has raised $400 million in a fresh round of funding.
- The agreement puts the company at $32 billion, a significant increase from $25 billion in October 2021.
- FTX has amassed a cash reserve at a time when cryptocurrency values have plummeted.
In a new funding round disclosed Monday, cryptocurrency exchange FTX saw its valuation rise to $32 billion, indicating sustained interest in the sector even as investors become worried of a dramatic drop in crypto prices.
The Bahamas-based firm announced on Monday that it has received $400 million in a Series C financing round, making it its third in less than nine months.
FTX is one of the world's major digital currency exchanges, offering both futures and spot trading. The company has grown from obscurity to become a prominent player in the nascent sector, rivalling Coinbase and Binance.
In the United States, the firm does not provide trading services. Its sibling exchange, FTX U.S., performs this function. FTX U.S. announced a $400 million investment last week, valuing the company at $8 billion.
All of the U.S. affiliate's backers, including Singaporean state investor Temasek, SoftBank's Vision Fund 2 and Tiger Global, come on board for its own fundraise, according to FTX.
FTX has amassed a war chest at a time when digital currency prices have plummeted, having raised a total of $2 billion in venture capital to far. Bitcoin has fallen 46% from its November high of around $69,000, while other cryptocurrencies have fallen much more.
This has fueled fears that the market is on the verge of a more severe decline, dubbed "crypto winter." The last time this happened was in late 2017 and early 2018, when bitcoin plummeted by up to 80% from its then-record high. Bear markets are usually terrible news for crypto exchanges since they signify dwindling volumes.
"I don't believe we're entering a long-term crypto winter," FTX CEO and co-founder Sam Bankman-Fried told in an interview.
"There have been shifts in interest rate forecasts, which has influenced crypto markets." But it's also affecting markets in a broader sense."
Indeed, stocks have taken a beating in recent weeks, with the Nasdaq down 11% year to far as investors review tech firms amid concerns about the Federal Reserve raising interest rates. Since debuting on the Nasdaq last April, Coinbase, FTX's publicly traded competitor, has seen its stock drop 46 percent.
When asked if his company may consider an IPO, Bankman-Fried stated, "It's something we've been talking about."
"I'm not convinced we'll be able to do it." I saw it happening, and I saw it not happening. We don't believe we have a compelling reason to do it."
He did say, though, that the firm will "attempt to be prepared" in case "it's something we do end up wanting to undertake." He noted that such preparations would involve audited financial statements and an assessment of potential listing possibilities.
While the crypto market has exploded in recent years, regulators have been increasingly suspicious of digital assets, fearing that they may be used in frauds and other illegal activities.
Obtaining permits in various countries is a major focus for FTX, according to Bankman-Fried. Its U.S. subsidiary is now permitted to trade derivatives such as futures and options, which allow investors to bet on asset price changes. By the end of the year, Bankman-Fried expects FTX's foreign business to be licenced across "the bulk of the Western world."
The extra cash will be used to continue creating new items, according to the company. FTX developed a platform for trading non-fungible tokens — the crypto world's version of collectible objects — last year and is now licencing its software to other financial and gaming companies, according to Bankman-Fried.
Since October 2021, when it last raised money at a $25 billion valuation, FTX said its user base has grown by 60%, and daily trading volumes have increased by 40% to an average of $14 billion. A $2 billion venture fund was recently launched by the corporation to invest in cryptocurrency start-ups.
Who is Sam Bankman-Fried?
Bankman-Fried and colleague co-founder Gary Wang started FTX roughly three years ago.
Despite the fact that Bankman-Fried began his career as a trader at the Wall Street firm Jane Street, the crypto CEO is not your ordinary finance executive. He eats vegan food, dresses in t-shirts and shorts, and lives on a sunny island.
However, he does have one thing in common with classic financial types: lengthy work hours. Bankman-Fried has previously stated that he can function on only four hours of sleep every night. He claims he now sleeps "a little more," but "not a lot."
FTX is now one of the most valuable private crypto start-ups in the world, according to its recent investment. Bankman-Fried is one of the wealthiest persons in crypto, with a net worth of over $22 billion, according to Forbes. That sum is likely to be substantially higher now that his shares are worth more.
Bankman-Fried made his early income trading bitcoin at Alameda Research, a quantitative trading outfit. He employed arbitrage, a trading strategy in which investors seek to profit on price differences between exchanges for the same asset.