The native tokens of centralised cryptocurrency exchanges like FTX, Huobi and Binance (which was banned in the UK earlier this year) have been gaining value, as rising interest in crypto trading is bringing in higher revenue from trading fees.
The price for FTX’s coin this year has reflected the volatility in cryptocurrency prices and trading activity, climbing during the strong rally seen in April and May and spiking to an all-time high when cryptos like bitcoin saw a short squeeze in early September.
What is FTX’s FTT coin and how does it work?
In this analysis, we look at how FTX uses the FTT coin and the latest projections for the price in the future.
FTT powers FTX exchange
The FTX cryptocurrency derivatives exchange was founded in 2017 and launched in May 2019 by CEO Sam Bankman-Fried and CTO Gary Wang. Bankman-Fried was previously a trader at Jane Street Capital and designed its automated over the counter (OTC) trading system. He also founded cryptocurrency quant trading and market-making firm Alameda Research.
Wang also co-founded Alameda Research and was previously a software engineer at Google.
FTX aims to provide a platform with advanced features for professional traders, while remaining intuitive enough for new users. Its features include collateral, liquidation processes and maintenance margins as well as product listings. It offers leveraged tokens, which allow traders to open leveraged positions without needing to borrow funds on margin. The tokens are ERC-20-compatible, so they can be listed on any spot cryptocurrency exchange.
Its liquidation engine aims to reduce the likelihood of clawbacks ever occurring, unlike other derivatives exchanges where customers can lose large amounts of funds.
According to the FTX blog post,
“If a user has a leveraged futures position on and markets move against their account enough that their net asset value is negative, then someone has to pay for that loss; and in crypto you can’t repossess assets from the bankrupt account’s owner from outside the system, so you’re stuck with other users – the users who aren’t getting liquidated – footing the bill.”
It explains: “Like most liquidation engines, the one FTX uses starts by detecting when a user has dropped below maintenance margin. Unlike many other platforms it chooses intelligent, efficient values for these.”
The exchange sends “reasonable, volume-limited liquidation orders to close down positions that drop below maintenance margin (which starts at 4.5% and increases with position size)” and if there is a large liquidation and markets are moving down rapidly, liquidity providers take over and hedge their books on other exchanges to prevent a likely bankruptcy.
As the FTX cryptocurrency, FTT is the backbone of the ecosystem. Regulations in the US limit derivatives trading, so FTX offers a separate site for US customers where FTT is not available. In the FTX crypto news from 25 October, the company completed the acquisition of US-based LedgerX, a derivatives company regulated by the Commodity Futures Trading Commission (CFTC).
The company said:
“With the finalisation of the sale and purchase agreement for this acquisition, FTX US will gain a CFTC regulated Designated Contract Market (DCM), Swap Execution Facility (SEF), and Derivatives Clearing Organization (DCO). These will be available to both retail and institutional investors 24×7 and offer block trading and algorithmic trading opportunities for institutional investors.”
It has rebranded LedgerX to FTX US Derivatives.
Internationally, FTX lists spot FTT/USD, FTT/USDT, and FTT/BTC pairs for trading. The FTT token is also listed on the Binance, Bitfinex, BitMax, CoinEx, Huobi and WazirX exchanges.
FTX users that hold FTT tokens receive rebates on their trading fees in a tier-based structure from 3% for holdings of at least $100 (£75) up to 60% for holdings of $5m.
Users can also stake FTT to receive a higher percentage of the trading fees of users they refer, maker fee rebates in addition to the standard fee discounts, opportunities to win free non-fungible tokens (NFTs), bonus governance votes, increased airdrop rewards, a number of free ERC-20 and ether (ETH) withdrawals per day and tickets for initial exchange offerings (IEOs) hosted on FTX.
FTX repurchases and burns FTT tokens, supporting its value. It buys tokens equal to 33% of the trading fees generated, 10% of the net additions to the backstop fund and 5% of fees earned from other uses of the platform. FTX buys the tokens on its FTT/USD market and burns them weekly.
FTT price reflects cryptocurrency volatility
The FTT price was $1.73 when it launched in 2019 and was little changed at $2.14 by the end of the year. It gradually trended higher in 2020, reaching $5.77 by the end of the year.
The FTT price then began to rally rapidly in early 2021 as cryptocurrency markets rallied and interest in trading them took off. FTT soared to $34.81 on 20 February, climbed further to $43.43 on 15 March, $59.56 on 14 April and $63.08 on 10 May, in line with spikes in cryptocurrency prices. Crypto rallies tend to attract new retail traders looking to make large returns from the volatile prices.
The FTT price declined from May as cryptocurrency prices crashed and trading activity fell. The price bottomed out at $21.93 on 26 June and resumed its ascent as cryptocurrency markets rallied over the summer. FTT moved back up to $54.11 on 14 August and the price jumped from $48.50 on 31 August to a new high of $65.97 on 1 September after FTX announced the LedgerX acquisition. A further rally lifted FTT to a fresh all-time high of $85.02 on 9 September as cryptocurrency markets continued to rise and a short squeeze pushed up the bitcoin price.
A dip in crypto markets pulled FTT down to $47.97 on 28 September, but a rise in prices in November lifted the token back above $65. The FTT price has remained volatile in recent weeks, trading down to $46.24 on 28 November and then back above $50.
What is the outlook for the FTT price? What do forecasters expect for the direction of the price?
FTT crypto price prediction: what will the FTX coin be worth in the future?
Technical analysis from CoinCodex showed sentiment was neutral with FTT trading at $51 at the time of writing on 1 December. There were 17 oscillator indicators giving bullish signals and 11 bearish signals. CoinCodex predicted that the FTT price could drop to $49.19 by 6 December. There was technical support at $49.85 down to $47.76, with resistance up at $51.93 to $54.01, the data showed.
The FTX crypto price prediction from WalletInvestor predicted that FTT could fall through support to $43.69 by mid-December, but more than double in value to reach $109.50 by the end of 2022. The algorithm-based forecasting site predicted FTT could double again to trade at $268.19 by the end of 2025.
The FTT token price prediction from DigitalCoin estimated that the price could average $91.31 in 2022 and $103.81 in 2023 based on historical data. It was less bullish than WalletInvestor, projecting that the FTT price could average $149.42 in 2025 and $226.18 in 2028, with a peak at $236.11 during that period.
The FTT/USD forecast from PricePrediction suggested that FTT could trade at $54.82 at the end of 2021, with an average price of $78.19 in 2022 and $249.31 in 2025. By 2030, the data projected that FTT could trade at an average price of $1,508.04 for the year.
It’s important to keep in mind, however, that cryptocurrency markets remain extremely volatile, making it difficult to accurately predict what a coin’s price will be in a few hours, and even harder to give long-term estimates. As such, analysts and algorithm-based forecasters can and do get their predictions wrong.
We recommend that you always do your own research, and consider the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns and never invest more than you can afford to lose.
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