FTX: a unique offer of derivative products

When it comes to crypto derivative exchanges, few can pretend to offer such a wide range of innovative products as FTX do. 

The exchange, incubated by Alameda research, was launched in May 2019 and immediately started off with a large offer of perpetual and futures contracts.

One of their competitive advantages, is their strategic partnership with Alameda research which is a top liquidity provider for crypto markets.

The volume picked up instantly which made it a serious contender in the industry.

It is not a surprise then that FTX is ranked among the top 3 exchanges by order book depth for BTC futures.

Let’s have a deeper look at what makes them truly different from the other ones.


Products overview

 

Futures

FTX futures products are like no other. The number of tradable altcoins is unique since they offer 25 different perpetual contracts (Bitcoin and indexes excluded). Expiring futures are also on the menu with the same list of coins renewed at each expiry.

Aside from being able to trade altcoins on leverage (up to 101x), the main advantage of those altcoin futures is their liquidity. Volume wise, they’re among the 10 best exchanges (derivatives and spot exchanges combined) in the industry. This data can be tracked in real time here.

The way index prices are calculated is very simple as well. All elements of each index are equally weighted among multiple exchanges such as: Binance, Bitstamp, Bittrex, OKEx, Kraken, Huobi…

 

Special indexes

We have seen that FTX offered a lot of different altcoin futures but what if i told you that you could get altcoin exposure to high caps, mid caps or low caps with one perpetual contract?

This is the purpose of ALT-PERP, MID-PERP and SHIT-PERP. They all are a different basket of altcoins using weighted average prices to create a new altcoin index.

Indexes composition:

ALT-PERP is a basket of 9 high-market-cap coins including: BNB, BCH, BSV, EOS, ETH, LEO, LTC, XRP & TRX.

MID-PERP is a basket of 24 medium-market-cap coins including: ADA, XLM, ATOM, DASH, IOTA, LINK… and many more (whole list available here).

SHIT-PERP is a basket of 58 low-market-cap coins including: ARDR, AION, BTS, ELF, GRIN, NANO, REN, RVM, STEEM, STRAT and many more (whole list available here).

Now, whenever you spot a trend in altcoins, you will be able to long or short them all at once. This is a unique offer in the market and one of the smartest ideas produced lately.

 

Leveraged tokens

Another innovation brought by FTX are the leveraged tokens. But what are they exactly?

In theory, the concept is simple. Those tradable tokens allow you to take leveraged trades without margin trading. The mechanism behind this is more complex though.

How does it work then?

Let’s take the MOON and DOOM tokens as a reference.

MOON is a 10x leveraged long token while DOOM is a 10x leveraged short token. They both are ERC20 tokens issued on Ethereum blockchain which represent respectively a 10x long position and a 10x short position. 

both are ERC20 tokens issued on Ethereum blockchain which represent respectively a 10x long position and a 10x short position. 

Token mechanism:

Technically, if you want to create $1000 of MOON, you need to purchase $1000 worth of token. MOON account will buy $10,000 worth of BTC perpetuals so MOON is 10x long BTC.

The inverse process is used to redeem the tokens and get back their net asset value. You just have to send back your $1000 of tokens on FTX, redeem them and the tokens will be destroyed. MOON account will sell back the $10,000 worth of futures and your account will be credited with $1000.

Advantages:

After reading this, you might still wonder why you would buy a leveraged token instead of margin trading. There are actually a few reasons to try it.

First of all, contrary to margin trading, liquidation is very unlikely. A complex algorithm automatically manages the risk by reinvesting profits into the underlying asset.

So if you bought MOON (10x long BTC token) and BTC goes down, the leveraged token will sell off some some of its BTC to ensure that you never get liquidated

Secondly, it is far more convenient to spot buy an ERC20 token without managing all the usual variables related to a margin position (leverage, position size, liquidation…).

And finally, since it’s a token, you can withdraw it and put it on cold storage on any Ethereum wallet.

You will find the whole list of different leveraged tokens available here.

 

Options

The latest addition to FTX was options. They officially introduced them on the 12th of January 2020.

Regarding the rising demand for them and the restrained number of players in this market (Deribit, OKEx, CME). This is another great move to make of FTX the all-in-one exchange.

In brief, options are contracts that allow (but don’t compel) you to buy or sell an asset at a predetermined date and price. 

If you want to go deeper into the subject, you can consult the Options explainer

 

Spot market & OTC

This product overview wouldn’t have been complete without mentioning that FTX also has a spot market relatively liquid for the majors (BTC, FTT, USDT, ETH) and offers OTC deals with an instant quotation 24/7.


 

Conclusion

FTX is undeniably becoming one of the leaders in the crypto derivatives market.

They decided to play the innovation card and it works.

Even if some products’ mechanisms might seem a bit complicated at first glance for the uninitiated, we have seen that they all are a perfectly mastered by algorithm engineering.

With a team of such young talented people, there is no doubt that FTX will keep thriving in the future.

If you would like to start using this platform, YellowBlock managed to negotiate a referral link giving you 10% off fees instead of 5%. You can subscribe through this link: https://ftx.com/#a=10off.

Disclaimer:

This article was sponsored as YellowBlock partnered with FTX for an advertising campaign.