FTX, one of the largest cryptocurrency exchanges by transaction volume, has seen its revenue grow by 1,046% in 2021, from $89 million in 2020, amassing a total of $1.02 billion. This information was gotten from CNBC, which cited internal documents seen by them.
FTX was founded three years ago by former Wall Street quant trader, Sam Bankman-Fried, who is the second richest man in crypto today. The 30-year-old CEO has recently stepped in as the industry’s lender of last resort, looking to backstop companies as liquidity dried up. It looks like FTX’s bumper performance in 2021 is the reason why FTX has the capital and funds to support many cryptocurrency companies during the current crypto winter.
According to the documents seen, FTX had roughly $2.5 billion in cash at the end of last year with 27% profit margins. Margins were closer to 50% if advertising and “related party” expenses are stripped out. It last raised funds in January, collecting $400 million from investors like SoftBank’s Vision Fund 2 and Tiger Global, at a $32 billion valuation.
What you should know
- FTX began operations around the same time when Coinbase and Binance had solidified themselves as the world’s largest trading venues. Coinbase still operates largely within the U.S. Binance, the largest exchange by trading volume got its start in China, and later moved its headquarters to the Cayman Islands and is now making a push for the U.S. market with an American subsidiary. FTX however, has been quietly building its own fleet of global subsidiaries to compete.
- FTX Trading Ltd. is headquartered in Antigua, with FTX Derivatives Markets based in the Bahamas, where Bankman-Fried lives. FTX Trading recently bought Digital Assets DA AG, out of Switzerland, as well as IFS Group and Hive out of Australia – bringing the total to 15 smaller companies across the world.
- The firm’s portfolio companies span Cyprus, Germany, Gibraltar, Singapore, Turkey and the United Arab Emirates, among other countries, according to the documents. Crypto companies often acquire start-ups to quickly get the proper regulatory licenses to set up shop in a new country.
- FTX’s U.S. business is technically owned by a parent company, West Realm Shires Inc. As of 2021, FTX U.S. made up less than 5% of FTX’s total revenue. Still, the company is making a push to expand in the U.S. with a series of high-profile ads and sponsorships.
- Speaking of adverts, FTX spent roughly 15% of revenue on advertising and marketing in 2021, according to the documents. That may account for its 2022 Super Bowl ad with actor Larry David and high-profile celebrity endorsements by Tom Brady and Giselle Bündchen, who are also equity investors in the company.
- FTX also bought the naming rights to Miami’s NBA arena, formerly the American Airlines Arena. FTX planned to spend an estimated $900 million in advertising in the coming years, according to the documents.
- The firm’s operating income was $272 million, up from $14 million a year earlier. FTX saw net income of $388 million last year, up from just $17 million a year earlier.
- So far, the company has brought in $270 million in revenue in the first quarter of 2022 and was on track to do roughly $1.1 billion in revenue in 2022, according to an investor deck shared with CNBC. But it’s unclear how FTX held up in the second quarter as crypto prices plunged during the recent “Crypto Winter.”
By way of comparison, Coinbase also experienced a cash boom during crypto’s bull market, with $7.4 billion in revenue and $3.6 billion of net income last year. But in the second quarter of this year, it reported $808.3 million in revenue, a decline of 64% from the year-ago quarter, and a surprise net loss of $1.1 billion, compared with $1.59 billion in net income a year earlier, as retail trading volumes declined.
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