Review: FTX

Update (10 Nov 2022):  Following the failure of FTX, we are withdrawing all our recommendations in the crypto space. Readers should not rely on anything in the post below. We are leaving the posts up for accountability but striking out all text to avoid any misunderstanding. 

The Bottom Line

FTX lists the most coins among the top 50 coins by value and covers more than half of the top 200. It has never been hacked, has the highest trading volume, lowest trading fee and most liquid crypto lending & borrowing options of any exchange available to Singapore residents.

It has received investments from Temasek, Sequoia and Lightspeed and has a very well regarded management team.

However, it has a short operating history, fairly limited licenses (nothing by the MAS) and weak customer service.

If you value wide coverage and low fees above all, FTX is our pick for you. See our piece on The Best Crypto Exchange for users in Singapore for more details on our decision criteria.

What is FTX?

FTX is a cryptocurrency exchange headquartered in the Bahamas. It has nearly 2.5 million users and reported revenue of US$750mm and profit of US$350mm in 2020.

It has been valued at US$32bn in Feb 2022 and has investors like Temasek, Sequoia, Tiger Global and Lightspeed Ventures.

The company has a subsidiary, FTX.US to serve customers in US. FTX.US has some licenses in US related to money services (but not banking or custody) and similar licenses in Australia. They do not have any licenses or exemptions from the MAS and we are not aware if they are trying to get those.

FTX offers access to more than 300 cryptocurrencies on its platform through its spot and futures markets. They also offer markets for leveraged token, prediction markets and the opportunity to lend cryptocurrencies.

How is FTX different from other Crypto Exchanges?

One low price Unlike many crypto exchanges, FTX offers a single, simple and low pricing scheme. They charge an average fee of 0.045% for spot and futures trading, across web and FTX Pro app platforms. There are discounts for staking their coin, the FTT, and for high volumes.

They do have a simplified app called FTX, but it requires a separate account, and unlike most other exchanges the simplified interface does not come with a higher fee. We did not review this app as it is different from the core FTX business.

Futures FTX has the highest trading volume for futures of any exchange available for users in Singapore. They offer perpetual futures on nearly 180+ coins. This allows you to conveniently gain exposure to coins that are not listed for spot trading on FTX.

Lending  FTX has a very active lending market with billions of dollars of loans outstanding. While most other exchanged did not disclose this data, the volume of lending on FTX was a lot higher than any of the ones that did. They offer lending options on more than 100 coins and the lending rates are regularly updated.

Other Assets FTX offers a number of other instruments for trading including NFTs, leveraged tokens, volatility derivatives, prediction markets and even some stocks and FX. Some of these, like the prediction markets and stocks, are not open to users in Singapore. They also don’t seem to have a lot of activity for now.

Security FTX was one of the few exchanges we reviewed that has never been hacked.  However they also had less disclosures on their website about their security practices than many of the other exchanges.

Short history FTX has the shortest operating history among all the exchanges we reviewed. It was founded only in May 2019.

Capital Raise & Ambitions FTX has raised nearly US$1.7bn over last 7 months from major investors at increasing valuations. This is excluding the $400mm raised by its US subsidiary, FTX.US.

FTX apparently also has larger ambitions outside crypto. The already offer some stocks and betting markets and may offer more in future.

Is FTX licensed?

FTX’s subsidiaries do have a few licenses. Excluding the ones in tax havens, the main ones seem to be a digital currency exchange license and a financial services license in Australia.

FTX.US does have a few licenses in US related to money services. However it is a separate entity from FTX (although it has the same management team).

FTX does not have any licenses or exemptions from MAS and we don’t know if they have applied for anything. FTX CEO Sam Bankman-Fried has commented that they expect to have licenses across “bulk of the western world” by the end of this year.

Overall, it seems that FTX has licenses that impose standards for KYC and anti-money laundering but no licenses that subject them to stronger examination by the regulators.

Is FTX safe?

FTX has never been hacked but it has only been operating for <3 years. Many other major exchanges have operating histories of nearly 10 years now.

We were also able to find fairly limited information about their security practices on their website, less than most other exchanged we shortlisted. Some external sites do provide additional details but we weren’t able to get confirmation from their customer service.

However the platform does follow good security practices for user accounts. 2 factor authentication (2FA) was set up immediately after identity verification. 2FA is required for all withdrawals and you can also optionally set up a list of whitelisted withdrawal addresses and a separate withdrawal password.

Overall, while we can take some comfort in the fact that it has never been hacked, it would be good to see them disclose more information on their website.

What fees does FTX charge?

FTX has a single, tiered maker / taker fee structure for both spot and futures trading. Rates start at 0.02% for makers and 0.07% for takers, with discounts if your trading volume exceeds US$2mm a month or if you stake their token, the FTT.

Makers are typically limit or other orders that are not immediately executed while takers are orders that are immediately executed, such as a market order.

FTX does not charge any fees for fiat deposits through wire transfers. Fiat withdrawals over US$5,000 are free and  one smaller withdrawal a week is also free. Crypto deposits are free and withdrawals are largely free, though users need to pay blockchain fee for ETH & ERC-20 tokens.

Overall, we found FTXs fee structure to be one of the most attractive ones among the exchanges we looked at. The fees were simple and fair. We liked the fact that FTX does not employ the trick of charging higher fees for a “simplified” interface.

What tools & data do FTX offer?

Like most other crypto exchanges, the FTX trading platform is focused on trading and does not offer many other tools or data.

You can check prices of various coins and instruments, look at customizable charts, examine your positions, historical and open trades and P&L. You can do minor customization of reports and some customization of the trading layout.

Some online brokers offer a fair bit of data and analytical tools to evaluate stocks. None of the crypto exchanges, including FTX, offer anything similar to evaluate the coins or other instruments trading on their platforms.

Spot Coverage & Liquidity FTX lists more than 330 coins on their Spot exchange. While that is a large number of coins, we also compared the coverage of the top 200 coins by market value.  Only 71 out of the top 200 coins are listed on FTX and 28 out of the top 50. Those numbers put FTX in the middle of the range for the exchanges we looked at.

FTX has had daily spot trading volume averaging around US$2bn over the last 3 months. That also falls in the middle of the range of the exchanges we reviewed.

Futures Coverage & Liquidity FTX also offers more than 300 futures, including for nearly half of the top 200 coins. Futures trading accounts for bulk of the trading volume on the platform, averaging nearly US$12bn a day over the last 3 months.

FTX offers perpetual futures on nearly 180 coins. Unlike the usual futures for stocks and indices, these futures do not need to be rolled over every month. This makes them quite convenient and cost effective option for getting leveraged exposure to various coins.

In FTX you can choose up to 20x leverage but only 14 coins can be used for collateral, apart from your fiat balances.

Funding You can fund your account on FTX with many fiat currencies through wire transfer or credit card. Ideally you should fund the account in USD and we do not recommend funding the account in SGD or another currency if possible.

This is because all spot crypto transactions are made in USD and other currencies are first converted to USD and you may be charged a higher spread at FTX than at your bank. In our testing we saw quoted spreads between 0.8%-1.2%, which is higher than what you would usually pay when converting at  your bank.

Also FTXs account is in US and we saw most banks in Singapore charge a wire transfer fee when transferring SGD to US accounts. USD wire transfers were usually free. We also saw the deposits appear in our FTX accounts in 2-5hrs.

Unlike our other pick Gemini, FTX does not support FAST or PayNow transfers.  They do offer the option of purchasing crypto using credit cards via an external service provider, Simplex. However Simplex charges fairly high spread or fee for these purchases, 3-3.5% and we would usually not recommend these options.

The funding process is simple and the site and app provide clear instructions and disclosures once you start the process.

We did not have any issues depositing various coins in the account either. The instructions provided are simple.

Withdrawal We found crypto withdrawals to be quite simple too and they worked as advertised with no fees charged on BTC or other non-ERC20 coins. We have not yet tested fiat withdrawal.

Trading on FTX is straight forward. Click on Markets in the menu, select the instrument from the list and enter order details.

Apart from the usual Limit and Market orders, you can also put Stop Loss, Take Profit and Trailing Stop conditions.  The system provides warnings if your collateral levels are low or for using the advanced order types.

FTX also lets you create rule based trading strategies with their Quant Zone feature. Here you can create rules based on price, volume, margin situation in your account, positioning data etc. This seems to provide a lot of flexibility in creating complex strategies although we did not test it.

Margin Lending & Borrowing FTX enables lending and borrowing of more than a 100 coins. Lending is quite convenient. Simply go to Wallet in the main menu and you see an option to lend against each coin / fiat currency you hold, with the rate clearly mentioned.

At the time of writing you could get 1% for lending USD & ETH and 0.88% for BTC. You can specify the minimum rate at which you want to lend and the amount. The interest is paid hourly and the lent out funds can be recalled within an hour.

For some reason the rates for borrowing are mentioned only on an hourly basis and no annualized number is shown.

Other Assets A number of assets apart from just cryptocurrencies & derivatives are listed for trading on FTX. This includes prediction markets, fiat currencies, stocks and NFTs.

However the coverage is spotty and we couldn’t find any volume data. For instance, the prediction markets have only two instruments at the time of writing – a Trump 2024 market and a Bolsonaro 2022 market, i.e. betting on the probability of the two of them becoming President in those years.

There are a few thousand NFTs listed on the platform. Many of them appear to be gags although we are not qualified to assess the market. In our research FTX did not come up as a major player for NFTs. They charge 5% fee to both buyer and seller for NFT transactions.

There are also about 50 stock listed on FTX, mostly vs. USD but also notably Tesla vs. BTC and DOGE. The volume of trading in these looks to be very low, with some close to US$1mm and most less than $100K.

These other assets potentially hint at longer term ambitions of FTX but are not relevant for now.

Is FTX easy to use?

The FTX platforms are not hard to use although it often took some effort to locate the feature or setting we were looking for.The menu items are not very logically arranged.

The mobile app does appear to be better organized and easier to navigate although we couldn’t find features such as rule based trading and NFT on the app.

We don’t think any crypto exchange offers a user experience that is materially better than the rest and FTX is squarely in the middle of the pack.

How is FTX’s Customer Service?

We were somewhat disappointed by the customer service experience at FTX. Opening support tickets on the app worked well for basic questions.

But we did not get answers to our detailed questions around security practices at all. The ticket is still open at the time of writing, more than two weeks after the ticket was opened.

There is no chat option available in the app or on web. Instead you can join their Telegram channel where FTX admins provide assistance. While the response was again good for basic issues, we got no help with our detailed questions.

Also we were bombarded with direct messages from people pretending to be FTX admins after we posed a question in the channel. In the main channel, the admins post repeated reminders that they will never reach out to anyone with a direct message.

So they are aware of the problem but continue to rely on the channel. We felt this was a very poor support experience for a company engaged in financial services.