Barely two years after its creation, the FTX group led by Sam Bankman-Fied continues its conquest of the cryptosphere in all directions. Indeed, the group’s American subsidiary, FTX.US, has just announced its forthcoming acquisition of the company LedgerX, in order to give US investors privileged access to Bitcoin derivatives on their exchange.
A major acquisition for FTX.US
Until now, and unlike FTX International, its US subsidiary FTX.US could not allow its users to trade derivatives. This is now a reality. FTX.US has just announced that it will acquire LedgerX, a company specialized in this very dynamic investment sector.
This acquisition opens up the derivatives market to institutional and retail investors located in the United States and using the FTX platform. There was no disclosure of the financial terms of this acquisition. In addition, the deal is expected to close in October. FTX.US CEO Brett Harrison welcomed the acquisition:
“This acquisition marks an important milestone for our growing US business and is a key part of our strategy to offer regulated crypto derivatives, to our US user base. We believe the integration of our technology skills, product portfolio and expertise with LedgerX will strengthen our ability to provide innovative products to all US cryptocurrency traders.”Brett Harrison, CEO of FTX.US
Historically, LedgerX was the first company to offer “physical” futures contracts on Bitcoin and Ethereum approved by the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM). As such, it is authorized to offer trading in Bitcoin derivatives regulated in BTC (and not in dollars). LedgerX offers its services to both institutional and retail investors.
Finally, Zach Dexter the co-founder and CEO of LedgerX, said that this acquisition would not have any significant impact on the functionality offered. The existing customer base will continue to enjoy the current features and offerings.
An important market is opening up for FTX.US
Without question, FTX.US wants to take advantage of the huge boom in derivatives trading. According to data from The Block, as of last July, spot trading volume is close to $816.53 billion compared to $1.47 trillion in derivatives trading.
The first image represents the volume in dollars, traded on exchanges in spot. The second image represents the volume traded on derivatives. The purpose of this reconciliation is to compare the difference in volume.
Comparison of spot and derivative volumes – Source: The Block
The numbers speak for themselves. And, it’s easy to see why the derivatives market is so interesting for digital asset platforms. The FTX exchange seems to have understood this with this acquisition, which allows it to strengthen its leadership position within the crypto ecosystem.
It remains to be seen whether leverage, which is the process of multiplying potential gains or losses, will be limited for FTX.US’ catalog of derivatives. The affirmative seems to be the preferred answer due to the current trend of exchanges to limit such leverage.
Nevertheless, in an interview with Forbes, Sam Bankman-Fried lamented the stigma of leverage in the cryptocurrency market. According to him, critics of this practice fail to mention its existence in traditional financial markets. Indeed, leverage is often cited as one of the causes of the biggest market drops. However, in traditional markets, leverage is present, but rarely pointed out. However, it should be noted that the use of this type of tool has already caused significant losses for hedge funds, notably during the GameStop episode.