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Original title: "Interpretation of FTX's $900 million financing: out of the circle, from an exchange to a financial giant"
On July 21, the encrypted trading platform FTX announced the completion of a $900 million Series B financing, including Sequoia Capital, SoftBank, Ribbit Capital, Paul Tudor Jones Family Office, Coinbase Ventures, Paradigm and more than 60 investors participated in the investment, The post-investment valuation is as high as US$18 billion, the largest financing record in entrepreneurship.
Formally established in May 2019, FTX took more than 2 years to complete the leap from 0 to 18 billion U.S. dollars. After raising 900 million U.S. dollars, where will FTX go next? Why Binance No Longer Holds FTX Stakes?
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all to break the circle。
The Crypto World Is Small, The Financial World Is Big
When Sam Bankman-Fried (SBF), who has a background in MIT and Wall Street, set foot in the exchange field, it may mean the beginning of the Wall Street elite’s attack on traditional currency circles.
In 2019, many cryptocurrency exchanges are still involuntary for listing altcoins/model coins. FTX has chosen a different path from the beginning, relying on product innovation to drive the market.
Index contracts anchoring a package of tokens (altcoin index, Shenlong (China project) index, etc.), stock tokens such as Tesla, leveraged tokens, index tokens, US elections and other prediction products... let FTX get rid of The highly homogeneous competitive track has embarked on the road of relying on derivatives to get out of the circle.
In addition, in terms of marketing and publicity, FTX has actively sponsored and named the NBA Miami Heat stadium, the LOL team TSM, and the Major League Baseball (MLB), constantly expanding the boundaries of cryptocurrencies and trying to embrace a wider range of investors.
Everything FTX does seems to be for a broader outreach and a larger market, and this financing is no exception.
In interviews with Bloomberg and Forbes, SBF identified two uses for the financing:
(1) Find strategic allies to help FTX develop and establish partnerships with investors;
(2) There is more capital for M&A, could be non-cryptocurrency companies, exchange shops, NFT platforms...acquisitions could be private market deals, companies are fairly flexible in valuation range, potential targets are between $5M and $1B .foreseeable,FTX will be a big buyer of cryptocurrencies for some time to come
In 2020, FTX acquired the cryptocurrency portfolio management app Blockfolio for $150 million.
In the future, FTX is not just a cryptocurrency exchange, but a financial group based on exchanges, which is similar to Coinbase.
When many equity investors pour in, how to exit has become a practical consideration, and FTX listing will become an option that can be expected.In July, in an interview with The Information, SBF stated that it would consider listing FTX and was inclined to list directly. In addition, SBF also disclosed an important data information,
With the rapid rise of FTX, the pattern of top exchanges has begun to reshuffle.
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Binance exits FTX equity investment
Along with the FTX financing news, Binance has completely withdrawn from the FTX equity investment.
According to Forbes, Binance founder Changpeng Zhao (CZ) said that the company recently gave up its stake in FTX.
"We've seen tremendous growth from them, which we're very happy with, but we've exited completely." CZ explained the divestment as part of the normal investment cycle, saying "We're still friends, but we don't have any equity relationship anymore .”
In December 2019, Binance made an undisclosed strategic investment in FTX.
Why Binance withdrew from FTX investment?
In the investor list of this round of FTX, we found the figure of Sequoia Capital, the former "enemy" of Binance.
In 2017, Sequoia Capital sued Binance in Hong Kong due to the "Exclusive Clause" in Binance's A round of financing. reputation.
Since then, Sequoia Capital and Binance have also become enemies. Changpeng Zhao once stated on social media that he required projects launched on Binance to disclose their connection with Sequoia, implying to block projects invested by Sequoia Capital.
When FTX got the investment from Sequoia Capital, it may be destined to "break up" with Binance, or when FTX "broke up" with Binance, it won the investment from Sequoia Capital.
FTX teamed up with Sequoia Capital, which was most likely introduced by Matt Huang, the co-founder of Paradigm. He used to be a partner of Sequoia Capital, and Paradigm was also an investor in FTX, and played the role of FA in this round of investment.
FTX\Sequoia Capital\Paradigm will build a new alliance.
"The world needs a high-quality global cryptocurrency exchange that cooperates with regulators," Alfred Lin, a partner at Sequoia Capital, spoke highly of FTX in an interview, "FTX is that exchange and has the potential to become a leading cryptocurrency exchange for all types of assets financial exchange."
Secondly, although FTX and Binance have had equity investment exchanges before, in the words of SBF, the relationship is generally a competition and cooperation relationship. There are both business cooperation and contradictions and conflicts.
In March 2020, Binance delisted FTX’s leveraged tokens. The reason given in the announcement was that users did not understand the operating mechanism of FTX’s leveraged tokens. After listening to the opinions of the community, it had to be delisted to protect users.
This made SBF very passive and embarrassing for a time, and had to quickly launch leveraged token trading pairs denominated in USDT on FTX.
On May 12, Binance listed its own leveraged tokens, emphasizing that Binance’s leveraged tokens reduce the risk factor and fee rate, which is more in line with the needs of the encrypted asset market and safer.To express his attitude, SBF liked a tweet,。
It would be funny if Binance would launch such fraudulent two-way options after delisting FTX's leveraged tokens
In April 2021, after Binance launched equity tokens, SBF also tweeted.
"Binance also has equity tokens, and FTX's equity tokens are finished. Binance only has one equity token product, which is only open for trading for 33 hours a week. There are no futures, and users cannot redeem underlying stocks through CM-Equity .”
In the end, SBF used an expression with high emotional intelligence: "This is just a beta version of Binance, and only through peer competition and challenges can the encryption industry make more progress."
At present, whether it is spot or contract trading volume, Binance is firmly in the first position. More troubles come from the regulatory level, and FTX has shortcomings in spot trading that need to be made up.
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Look at FTX in detail
SBF has become a banner of the cryptocurrency industry today.
At the end of 2017, he founded Alameda Research; in 2019, he founded FTX; in 2020, he developed the Solana ecosystem... In just 5 years, SBF has become one of the richest people in cryptocurrency, and in more than 2 years, the market value of FTX has reached 18 billion US dollars, and the business territory has covered the first level Market investment, secondary market transactions, fund LP, exchanges, public chains, mining arbitrage, OTC... thus building a huge SBF ecological empire.
How SBF rises rapidly, digs down DeFi projects, and controls Sonala has always been a hot topic in the industry, and there are many gossips circulating, and other exchanges are also researching and discussing internally, but regardless of the grand narrative at the strategic level, small people From the angle of view, we may also be able to get a glimpse of the growth of FTX.
Erci, an industry practitioner, recalled the little things between him and FTX after he learned that FTX raised $900 million:
1. One of our portfolio companies is negotiating with a number of exchanges, all of which are saying that technology integration will take 4-5 months and require payment of listing fees. I mentioned this to sam, Four days later, the tokens were available for trading.
2. I noticed a strange but not serious bug in the UI interface of user FTX, mentioned this problem in Telegram, and their engineering supervisor fixed the problem the next day."3. I complain that the account balance does not show a comma, making it hard to read. they said:
Oh, and commas if you have a large balance.
4. A person I know was almost "epic-level liquidated". He was able to reach a deal with FTX's OTC without being liquidated. (As I have always been under the impression, FTX actually cares about customers.)
Another practitioner, russmonk, believes that in the final analysis, it is because FTX has an excellent leader and team, "I have never seen a big guy like Sam who provides user support for some small accounts on Twitter."
DooWanNam, former head of MakerDAO South Korea’s BD, said, “FTX is my favorite CEX so far. I especially like their flexible order system. You can place another order without canceling the previous order. The only disadvantage is that some trading pairs Its liquidity is very poor, if you mainly trade mainstream currencies and DeFi currencies, it is completely fine.”
Leaving aside FTX's marketing advertisements such as "SBF altruism" in various media, SBF is indeed a representative of "genius and hard work" in the industry. The pictures went viral.SBF replied under the picture, saying,“Fun fact, the peanut butter and jelly on top of the case was absolutely disgusting, they were past their expiry date”
, the degree of desperation can be seen, but the "side effect" is that SBF's stomach is directly proportional to the growth rate of his wealth.
As far as the creation of people is concerned, today's SBF has become the representative of the American dream of cryptocurrency, and it is also fiercely attracting more prestigious schools and financial industry elites to participate in the construction of this industry.
Recalling a past event, in 2019, SBF came to China to visit an industry leader, but was turned away. Now it seems a bit embarrassing.
It reminds people of an old Chinese saying, when you are a farmer in the morning, you are in the Tianzitang in the evening.
You never know how much energy a strange young man will have in the future, which may be the charm of this industry.
