One of the biggest cryptocurrency exchanges, FTX, is in negotiations with investors to raise $1 billion. The estimated value of FTX, if the funding is approved, is $32 billion.
The Goal Of FTX Is To Raise $1 Billion
Sam Bankman-Fried, the self-made crypto billionaire who launched FTX, intends to raise up to $1 billion in new capital, which would value the exchange at $32 billion.
This funding round is still being negotiated. The conditions for acquiring the additional cash could alter, according to sources familiar with the situation who spoke with CNBC on the condition of anonymity.
The information was made public in response to a story by a cryptocurrency news website that disclosed FTX’s impending investment at a flat valuation. If everything goes according to plan, the investment round will be the exchange’s second this year after the capital raise in January.
The top traditional financial institutions have already expressed interest in investing in the cryptocurrency exchange. Tiger Global, Temasek, and SoftBank’s Vision Fund 2 are among its current backers.
FTX has not yet made a statement about this investment round. However, according to the sources, a portion of the additional funds will go into promoting cryptocurrencies and luring new businesses.
In July, FTX successfully closed a deal to buy ailing cryptocurrency lender BlockFi. Additionally, there have been discussions of FTX purchasing the South Korean exchange Bithumb. FTX had put an offer on the table to buy insolvent Voyager Digital last month. Voyager, however, declined the offer, claiming it was not in its consumers’ best interests.
According to a Bloomberg article from June, FTX intended to purchase the Robinhood exchange. Bankman-Fried owns a sizable portion of the online social trading platform, although he has refuted rumors that talks to buy the company were underway.
The Performance Of FTX During The Bear Market
The bear market of this year has caused some cryptocurrency businesses to fail and/or declare bankruptcy. In the midst of the crypto cold, FTX has positioned itself as a business that helps other struggling businesses. To get bargain transactions, the exchange has swooped in.
The Bahamian exchange is a privately owned business. Bankman-Fried founded it three years ago. Bankman-Fried worked as a quant trader on Wall Street prior to starting FTX. This year, FTX has outperformed Coinbase, whose earnings and stock price have declined in line with the declining value of cryptocurrencies.
Compared to the $89 million in income from the prior year, the FTX exchange’s revenues surged by almost one billion percent in 2021 to reach $1.02 billion. Additionally, FTX announced $388 million in net profits for 2021. Despite a small momentum during the first quarter, this year’s revenues are unlikely to match those of the 2021 fiscal year.
The cryptocurrency market was experiencing a strong bull run at the time FTX reported these record-breaking revenues. However, as the Federal Reserve raised interest rates to combat inflation that rose to a 40-year high, the price of cryptocurrencies began to fall during the second quarter.
The majority of the money that cryptocurrency exchanges like FTX make comes from the trading commissions they charge on their websites. The bear market has therefore reduced these revenues because fewer traders are ready to expose themselves to the high volatility.