October 11, 2022

Market Update

• Ethereum Name Service (ENS) is up 7.5% this week while global markets are down
• FTT, the native token of crypto exchange FTX, surged 7% after a report that payment giant Visa (V) has partnered with the exchange to roll out crypto debit cards. “Even though values have come down there’s still steady interest in crypto,” Visa Chief Financial Officer Vasant Prabhu told CNBC
• Deloitte predicts 75% of merchants are currently looking to adopt cryptocurrencies as part of their digital payment strategies

VISA x FTX Partnership

Visa believes in crypto. They are teaming up with global exchange FTX to offer debit cards linked to a user’s investing account. This will allow customers to spend cryptocurrency in 40 countries without transferring the cryptocurrency manually. Instead, you can use your card to spend as you would with a traditional bank account.

This is a big step for crypto. It is also ironic that these partnerships are forming as giants battling for market share in the payments space have opted to team up and benefit together.

Sam Bankman-Fried, CEO of FTX, commented on the news, “We’re excited to partner with one of the world’s largest payment networks to give our users the ability to use their crypto to fund purchases at millions of merchants around the globe. This card allows users to make use of their FTX crypto balances 24 hours a day, 365 days a year securely and with no administrative or processing fees.”

FTX Token (FTT) Overview

The chart shows a head and shoulders pattern with price consolidating to find a bottom. The news of this recent partnership has helped but we are not ready to enter a position in FTX.

By focusing on institutional partnerships, FTX has been able to operate under more of a B2B business model when compared to Coinbase (COIN). We are exploring the details of the company to analyze how FTT can benefit from the future revenue growth of FTX. If you are interested in gaining exposure to cryptocurrency infrastructure and payments companies, FTX is best in class.

Several characteristics do appear appealing:

• FTT has a relatively low supply of 134 million tokens. Think of this as the stock float – stocks with a lower float have a higher chance to split in the future and they can rip in both directions in short order. Therefore, these stocks and tokens often have a higher degree of volatility because their dollar-for-dollar moves are significant. This is a characteristic of Tesla (TSLA) and it has held true – increasing stock splits, and big moves.
• FTT tokens are used for margin on futures positions. FTX caters to institutions and large trading firms and has experienced a large degree of success. The FTX exchange was built out of need from Alameda Research – after they experienced difficulties trading on other cryptocurrency exchanges – they decided to build their own.
• The FTT token is built on Ethereum (ERC-20 standard), and the exchange regularly buys back and burns its tokens, spending on the purchase of FTX: 33% of trading fees, 10% of the reserve fund, and 5% of other commissions.
• The company has billions on its balance sheet after raising from large investors like BlackRock and Sequoia. They have been acquiring competitors and fueling a massive global expansion.

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