HomeCRYPTOCURRENCY NEWSFTX US, a Coinbase Competitor, Has Been Valued at $8 Billion as...

FTX US, a Coinbase Competitor, Has Been Valued at $8 Billion as Investors Brace for a ‘Crypto Winter.’

POINTS TO MAKE

  • A $400 million funding round for FTX US, the American affiliate of the FTX cryptocurrency exchange, has been completed.
  • The investment places FTX U.S. among the world’s most valuable private crypto businesses with a valuation of $8 billion.
  • The deal illustrates that despite the dramatic drop in token prices, start-up investors’ faith in crypto has not been shaken.

This is the first time that FTX US, the American affiliate of cryptocurrency exchange FTX, has raised money from outside investors.

The investment places FTX U.S. among the world’s most valuable private crypto businesses with a valuation of $8 billion. Temasek, the Ontario Teachers’ Pension Plan Board, and SoftBank’s Vision Fund 2 are among the investors in this round of financing.

The acquisition illustrates that even in the face of steep declines in bitcoin and other token prices, start-up investors’ faith in the embryonic digital asset industry has not been shaken.

Even smaller tokens like Solana and Cardano are seeing greater drops in value than bitcoin and ether, the two most popular virtual currencies in the world, since their record highs in November.

FTX US, a Coinbase Competitor, Has Been Valued at $8 Billion as Investors Brace for a 'Crypto Winter.'

Some believe a “crypto winter,” a more worse decline, is on the horizon. According to Brett Harrison, president of FTX US, a “volatile asset class” has been demonstrated by the recent market turmoil.

He said, “Volatility is a double-edged sword.” In light of recent crypto market gains, it is reasonable to assume that there will be some declines as well. Right now, I believe, we’re in that time period.”

Stock markets have also fallen, according to Harrison, who called the trend “not exclusive to crypto.” His final words were, “I believe that we will see a bounce back.”

Sam Bankman-Fried, a 29-year-old crypto entrepreneur based in Hong Kong, founded FTX in 2019. As a result, investors reportedly valued the company at $25 billion and have subsequently relocated its headquarters to the Bahamas.

For this reason, Bankman-Fried set up FTX U.S. as the American sister to distinguish it from his main exchange as officials in Washington started paying more attention to the digital currency business. The platform will begin trading in May of 2020.

After bitcoin hit a record high of around $69,000, FTX U.S. stated in a trading update on Wednesday that average daily volumes on its platform increased sevenfold in 2021, culminating at over $800 million in November.

Last year, the business conducted spot crypto trades worth more than $67 billion. The overall number of registered users presently stands at roughly 1.2 million.

Coinbase and Robinhood are two of FTX U.S.’s main competitors, so it expects the investment will help it stand out. FTX is also pursuing derivatives, which allow investors to wager on the performance of a certain asset, just like the corporation. In October, it bought the cryptocurrency futures and options exchange LedgerX.

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Crypto derivatives have a far smaller domestic market in the United States, according to Harrison. There is “an incredible chance to bring a lot of that volume ashore,” he said.

Coinbase has agreed to acquire FairX, a derivatives exchange, earlier this month in an effort to expand beyond spot trading.

New rules are on the way.

The rapid growth of the crypto business is still a concern for regulators. It’s feared that some characteristics of the market could spread to other financial markets, and that investors are entering the market without fully understanding the risks.

The administration of President Joe Biden is expected to issue an executive order regulating digital assets as early as next month, according to reports.

Stablecoins and exchange regulation are the two main concerns of Washington officials when it comes to crypto, according to Harrison.

It’s not as straightforward as it sounds: digital currencies like tether and Circle’s USD Coin are supposed to be tied to the U.S. dollar. According to Tether’s own admission, in addition to dollars, its reserves comprise short-term debt commitments and other assets. In addition, USD Coin’s reserves had been made up of assets other than cash and US government bonds up to this point.

Crypto exchanges in the meantime are currently regulated in the United States as money transfer businesses. This “not a long-term future” and wants greater control with laws against market manipulation, a major cause of concern in the crypto market,” adds Harrison.

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