FTX Token (FTT) cryptocurrency: a token that has outlived its creator company
The peculiarity of tokens, unlike, for example, company shares, is that they can continue to exist and even be traded in the event of a company's bankruptcy. In the worst case, such assets will be removed from centralized exchanges, but they can continue to be traded on decentralized exchanges or OTC.
What is FTX?
The FTX crypto exchange was launched in 2019 and quickly became one of the leading crypto exchanges in the market. In 2021, FTX became the third-largest crypto exchange in the world. The number of its clients exceeded 1 million.
However, in November 2022, the management of the exchange filed for bankruptcy, closing the registration of new clients and withdrawing funds. According to Reuters, at least $1bn of client funds disappeared from the exchange's balance sheet.
FTT token
A year after the exchange opened in 2019, the company introduced its cryptocurrency, FTX Token or FTT, an ERC-20 standard token issued on the Ethereum blockchain.
At the time of writing, 328 million tokens (93.6 per cent) out of a possible 352 million are circulating on the market. Despite the FTX exchange's collapse, the FTT token's capitalization exceeds $1.1 billion, and the cryptocurrency is ranked 52nd in the CoinMarketCap ranking.
Unlike other exchange-traded cryptocurrencies, such as Binance Coin from Binance or OKB from the OKX exchange, the FTT token does not have its network. FTT was initially created to reward traders for exchange trades and reduce trading fees when paying with the exchange's native token.
However, over time, the token developed new functions. For example, the exchange offered VIP discounts to FTX customers based on the size of their positions, regularly redeemed and burned FTT tokens, limiting their supply on the market, and allowed the tokens to be used as collateral for trading futures contracts. The exchange used approximately one-third of the fees paid by traders to buy back and burn FTTs.
Users could also use the FTT staking service on the FTX floor. However, this was a deposit rather than staking: users lent their tokens to the exchange for rewards. In addition to accruing interest, FTT stakers could receive:
- valuable NFT tokens,
- airdrops (free cryptocurrency),
- tickets to participate in the initial exchange offer (IEO).
Stakers could also participate in voting on the development of the FTX exchange.
In September 2021, the FTT rate peaked at $79.5, after which it began to fall due to the beginning of a general downtrend in the crypto market. However, the situation was exacerbated by the collapse of the FTX exchange itself: after the media reported on the bankruptcy of the crypto exchange, the price of its native token, FTT, plummeted from $22 to $1.3 and then fell below $1. In April 2023, the rate rose 107% from $1.3 to $2.7 at one point amid rumours and a possible restructuring of the FTX business, but then continued to fall again.
In November 2023, the media again started talking about a possible relaunch of the crypto exchange, reporting plans by the former president of the New York Stock Exchange (NYSE) to buy out FTX, but so far, the details of the deal are unknown, as well as its timing. SEC Chairman Gary Gensler allowed the possibility of the crypto exchange reopening, but only if current legislation is enforced correctly. After these statements, the FTT token rose again and was trading at $3.4 at the time of writing.
What's in store for FTT and its token?
If the exchange is indeed relaunched, it could have a positive impact on the FTT exchange rate. According to media reports, lawyers have already analyzed the potential problems the company could face when the exchange is restructured. The lawyers noted that they have already recovered $7.3bn from the $11.8bn needed to pay out to the exchange's affected customers.
The restructuring algorithm was planned to be presented in July, but it is still unavailable so far, so the exact timing of the exchange's recovery is unknown. Based on this, it is difficult to predict the situation and assess the prospects of the FTT token, as everything depends on the success of the crypto exchange's restructuring.
