Failure Analysis
FTX died from systematic fraud masked as operational incompetence. The mechanics: Alameda Research (SBF's trading firm) borrowed billions in customer funds from FTX without...
FTX \Bahamas
FTX promised to be the 'safest and easiest way to buy and sell crypto'—a regulated, institutional-grade exchange that would bring Wall Street sophistication to the Wild West of cryptocurrency. The value proposition was trust arbitrage: while competitors like Binance operated in regulatory gray zones, FTX positioned itself as the compliant, professional choice for serious traders. They offered innovative derivatives products, celebrity endorsements, stadium naming rights, and a charismatic founder who testified before Congress. The psychological hook was simple: 'We're the adults in the room.' For institutional investors terrified of crypto's reputation but desperate for exposure, FTX was the answer. For retail traders, it was crypto with training wheels. The 'why' was powerful because it addressed crypto's core credibility problem at exactly the moment when mainstream adoption seemed inevitable.
Discover the reason behind the shutdown and the market before & today
Market Analysis
The crypto exchange market in 2025 is unrecognizable from FTX's heyday. Regulatory clarity has arrived: the US has crypto-specific legislation, the EU's MiCA framework...
Startup Learnings
Regulatory arbitrage is not a moat—it's a time bomb. FTX's Bahamas strategy worked until it didn't. The lesson: if your competitive advantage is 'we...
Market Potential
The crypto exchange market is mature and consolidated. Binance, Coinbase, and Kraken control 70%+ of volume. Retail interest has cooled significantly post-2022 crash. However,...
Difficulty
Rebuilding a centralized crypto exchange today faces insurmountable regulatory scrutiny post-FTX. Every jurisdiction now requires proof-of-reserves, segregated customer funds, and real-time auditing. The Bahamas...
Scalability
Centralized exchanges scale technically but face inverse regulatory scaling—the bigger you get, the more jurisdictions regulate you, each with conflicting requirements. FTX's model of...
Rebuild & monetization strategy: Resurrect the company
Execution Plan
Phase 2
Month 3-4: Add automated GAAP accounting integration—every crypto transaction auto-categorizes in QuickBooks/NetSuite. This is the killer feature that saves CFOs 10+ hours/month. Get 2 paying pilots at $1000/month.
Phase 3
Month 5-6: Build DCA automation (schedule recurring Bitcoin buys) + stablecoin yield (auto-deploy USDC to Aave/Compound with risk controls). Launch compliance reporting module (one-click audit trail generation). Target: 10 paying customers at $1500/month + 15 bps custody fee.
Phase 4
Month 7-9: Get SOC 2 Type II certified (non-negotiable for enterprise sales). Build Plaid integration for seamless fiat on/off-ramps. Add multi-sig approval workflows for large transactions. Target: $50K MRR.
Phase 5
Month 10-12: Launch API for programmatic treasury management (let companies automate crypto treasury via code). Build Salesforce/HubSpot integration for sales teams that accept crypto payments. Target: $150K MRR, 50 customers, ready for Series A.
Monetization Strategy
Hybrid model: (1) SaaS fee: $500-2000/month based on treasury size and feature tier. Basic = custody + reporting. Pro = DCA + yield. Enterprise = API + custom integrations. (2) Custody fee: 10-25 basis points annually on assets under custody (industry standard). A company with $5M in crypto pays $5K-12.5K/year in custody fees + $1000-2000/month SaaS = $17K-37K annual revenue per customer. Target 100 customers in Year 1 = $1.7M-3.7M ARR. Gross margin: 70%+ (custody is outsourced to Fireblocks, software scales). CAC payback: 6-9 months via direct sales. Expansion revenue: upsell API access, add more wallets, introduce crypto payroll module. Exit: acquisition by Coinbase, Kraken, or traditional fintech (Brex, Ramp) looking to add crypto treasury as a feature.
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