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Cryptocurrency trade FTX hits $32 billion valuation regardless of bear market fears

Sam Bankman-Fried, CEO of cryptocurrency exchange FTX, at the Bitcoin 2021 conference in Miami, Florida on June 5, 2021.

Eva Marie Uzcategui | Bloomberg | Getty Images

Cryptocurrency exchange FTX saw its valuation rise to $32 billion in a new round of funding announced Monday, underscoring continued appetite for the sector even as investors grow cautious amid a sharp drop in crypto prices.

The Bahamas-based company announced Monday that it had raised $400 million in a Series C funding round — its third fundraising in the past nine months.

FTX, which offers both derivatives and spot trading, is one of the world's largest digital currency exchanges. Once an obscure name, the company has become a major player in the emerging market, competing with Coinbase and Binance.

The Company does not offer trading in the United States. This feature is provided by FTX U.S., its sister exchange. Last week, FTX U.S. announced a $400 million investment that values ​​the company at $8 billion.

FTX said all investors in the U.S. subsidiary, which included Singapore-based state investor Temasek, SoftBank's Vision Fund 2 and Tiger Global, have boarded for a fundraiser of their own.

Having raised a total of $2 billion in venture capital to date, FTX has built a war chest at a time when digital currency prices have fallen significantly. Bitcoin is down 46% from its November record of nearly $69,000 while other cryptocurrencies have plummeted even further.

That has led to fears that the market may be on the cusp of a more severe downturn known as "crypto winter." The last such event occurred in late 2017 and early 2018 when Bitcoin plummeted as much as 80% from its then record high. Bear markets are usually bad news for crypto exchanges as it means volumes tend to dry up.

"I think we're not entering a long-term crypto winter," Sam Bankman-Fried, CEO and co-founder of FTX, said in an interview with CNBC.

“There have been changes in interest rate expectations and that has moved the crypto markets. But it also moved markets more broadly.”

Indeed, stocks have taken a hit in recent weeks, with the Nasdaq down 11% year-to-date as investors reassess tech stocks amid concerns about higher Federal Reserve interest rates. Coinbase, FTX's listed rival, has seen its shares fall 46% since debuting on the Nasdaq last April.

When asked if his company might seek an IPO, Bankman-Fried said, "That's something we talked about."

"I'm not sure we're going to do that. I could see it happening, I could see it wasn't happening. We don't feel we particularly need it.”

However, he said the firm will "try to be prepared in case it's something we end up wanting to do". Such preparations would include audited accounts and a review of possible listing options, he added.

As the crypto market has seen seismic growth in recent years, regulators have become increasingly suspicious of digital assets, worried about their use in fraud and other illicit activities.

A big focus for FTX, Bankman-Fried said, is acquiring licenses in multiple countries. Its US arm is now authorized to sell derivative products, such as futures and options, that allow investors to speculate on an asset's price movements. Bankman-Fried said FTX's international business will be licensed to "most of the western world" by the end of this year.

The company plans to use the fresh funds for further new product development. FTX last year launched a marketplace for trading non-fungible tokens — the crypto world's answer to collectibles — and is now beginning to license its software to other companies in the fintech and gaming sectors, Bankman-Fried said.

FTX said its user base has grown 60% since October 2021, when it last raised money with a valuation of $25 billion, while daily trading volume has increased 40% to an average of $14 billion. The company recently set up a $2 billion venture fund to invest in crypto startups.

Who is Sam Bankman Fried?

FTX was founded by Bankman-Fried and his co-founder Gary Wang almost three years ago.

Although Bankman-Fried started his career as a trader at Wall Street firm Jane Street, the crypto boss is not your typical finance executive. He's vegan, wears t-shirts and shorts, and lives in a sunny island nation.

However, he shares one thing with traditional finance types: long hours. Bankman-Fried previously said he gets by on just four hours of sleep a night. He says he's sleeping "a little more" now, but "not much."

FTX's recent investment makes it one of the most valuable private crypto startups in the world. At just 29 years old, Bankman-Fried is one of the richest people in crypto, according to Forbes, and has amassed a net worth of over $22 billion. Now that its shares are worth more, that number is likely to be even higher.

Bankman-Fried built a bitcoin for early wealth trading at his quantitative trading firm Alameda Research. He used arbitrage, a trading strategy in which investors try to profit from price differences for the same asset on different exchanges.

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