Ali Raza
FTX, one of the largest cryptocurrency exchanges, is holding talks with investors to secure $1 billion in funding. If the funding goes through, FTX is expected to have a valuation of $32 billion.
FTX plans to raise $1 billion in funding
FTX, a cryptocurrency exchange founded by crypto billionaire Sam Bankman-Fried, is planning to raise up to $1 billion in fresh funding, which would see the exchange’s valuation at $32 billion.
Negotiations on this funding round are ongoing. Sources close to the matter, who spoke with CNBC on the condition of anonymity, also say that the terms of raising the new funding could change.
The revelation follows a report by a crypto news site that revealed FTX’s upcoming investment at a flat valuation. If the funding round goes as planned, it will be the second one the exchange has secured this year after the January capital raise.
The crypto exchange has already attracted some of the leading traditional financial firms as investors. Its list of existing investors includes Tiger Global, SoftBank’s Vision Fund 2, and Temasek.
FTX is yet to issue an announcement regarding this funding round. However, the sources have said that part of the new funding would go towards crypto marketing efforts and attracting new deals.
In July, FTX secured a deal to acquire the troubled crypto lender BlockFi. There were also talks for FTX to acquire the South Korea-based exchange Bithumb. Last month, FTX had tabled a deal to purchase bankrupt Voyager Digital. However, Voyager turned down the offer saying it was not the best for its customers.
In June, a report by Bloomberg said that FTX was planning to acquire the Robinhood exchange. Bankman-Fried has a large stake in the online social trading platform, but he has denied that there were discussions to acquire the firm.
FTX’s performance during the bear market
This year’s bear market has seen some crypto companies go under, with some filing for bankruptcy. However, FTX has positioned itself as a company bailing out other stressed firms amid the crypto winter. The exchange has swooped in to secure deals at a discount.
The Bahamas-based exchange is a private company. It was founded by Bankman-Fried three years ago. Before founding FTX, Bankman-Fried was a quant trader on Wall Street. FTX has performed better this year than its rival Coinbase, whose revenues and stock prices have plunged relative to the dropping crypto prices.
The revenues of the FTX exchange increased by over 1000% in 2021 to reach $1.02 billion compared to the previous year’s revenues of $89 million. In 2021, FTX also reported a net income of $388 million. However, this year’s revenues are not likely to match the 2021 financial year despite a slight momentum during the first quarter.
When FTX was reporting these record-breaking revenues, the crypto market was on a strong bull run. However, the crypto market prices started to decline during the second quarter amid the Federal Reserve increasing the interest rates to tame inflation levels that soared to a 40-year high.
Cryptocurrency exchanges such as FTX make most of their revenues from the trading commissions charged on their platforms. Therefore, the bear market has dampened these revenues as fewer traders are willing to be exposed to the intense volatility.
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This article was written for Business 2 Community by Ali Raza.
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