Has the Crypto Sports Sponsorship Bubble Burst?

Last year, an influx of sports organizations signed deals with crypto exchange companies. With the crypto market in crisis, the gold rush mentality has come to an abrupt halt. The drum peeks at ais part of our in-depth sports marketing analysis.

2021 may well be remembered as the year crypto first went mainstream. Bitcoin, the world’s leading cryptocurrency, hit a record high of over $68,000 in November. That same month, the total valuation of the crypto market surpassed the staggering $3 billion mark. The future of cryptocurrency looked bright.

Building on their success, a number of crypto exchange companies ran ads during the last Super Bowl, costing millions of dollars each. One of them – an FTX ad starring Larry David – seemed to imply that the invention of crypto was historically significant, such as that of the wheel or coffee and that anyone who couldn’t appreciate it was a clumsy curmudgeon and disconnected. The other, a Crypto.com ad featuring Matt Damon, encouraged viewers to “seize the moment and participate” by investing in crypto.

To advertise

FTX Arena, home of the Miami Heat/Adobe Stock

But it wasn’t just during the Big Game that crypto firms used their newfound wealth. Some of them have also signed important agreements with leading sports organisations. For example:

  • In March 2021, crypto exchange site FTX signed a $135 million deal for the naming rights to the Miami Heat arena, changing it to FTX Arena.

  • In June 2021, Crypto.com became the official crypto sponsor of Formula 1.

  • In October of the same year, Coinbase became the official crypto exchange site of the NBA, WNBA, and NBA G League (the NBA’s minor league).

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  • In November, at the height of the crypto boom, it was revealed that the Staples Center in Los Angeles had been renamed Crypto.com Arena.

  • Also in November, Shohei Ohtani, MVP of the American League 2021, was named a brand ambassador by FTX – and was nicknamed “The Great Cryptohtani”.

  • In February 2022, the Washington Nationals signed a deal worth more than $38 million with blockchain company Terra, including in-stadium advertising and the construction of the Terra Club, described in the press release as a “first club space behind home plate.” “. .

  • In April of this year, the Dallas Cowboys became the first NFL team to officially partner with a crypto firm when it signed a $6.5 billion deal with Blockchain.com.

Why the sudden rush of crypto companies to partner with sports entities? Emerging brands have always sought to market themselves in the sports world for the same reasons: the massive audience and fan loyalty that brands can tap by associating themselves with a particular league, team or athlete. Sport is the main class of marketing. The Super Bowl, in particular, can help lift a brand from obscurity to stardom.

In other words, the sports world provided crypto companies with the keys they needed to open the hearts and minds of the masses. “[Sports deals] making a splash in the market and that’s exactly what [crypto] brands need,” said Jim Andrews, founder and CEO of A-Mark Partnership Strategies, a company that specializes in helping brand marketers navigate partnerships. “It’s a dark area and there are still tens of millions of people who don’t really understand what crypto is… [these deals] familiarize them with their brand names. »

Then, from the spring of 2022, the sunny skies darkened and the so-called “crypto winter” began. coins like Bitcoin are falling. Fortunes have been wiped out. Many famous crypto evangelists have been conspicuously and suddenly silenced. Major crypto exchange companies have started laying off dozens of employees.

There are many in the crypto world who insist that the current crash is nothing to worry about. This is part of it, they will say; hold on for life (HODL) and buy the dip. Coinbase even ran an ad, “Long live crypto,” during the NBA Playoffs in May, which basically claimed it was foolish to stop betting on crypto just because the market is struggling. On the other hand, some economic experts will say that this crash is fundamentally different and more severe than previous downturns.

Time will tell which side is right. If the crypto market picks up again, crypto evangelists will be (at least temporarily) in their favour, and we’ll likely see a slew of announcements from crypto companies conveying the message, “We told you.”

Right now, the world is holding its breath and waiting to see what will happen to the crypto market. It is certainly unlikely that major sports organizations will make deals with crypto exchanges as long as they struggle to stay afloat. “We’re not going to sign the deals we saw in 2021 in 2022,” Andrews said.

That’s not to say, however, that the contracts born last year have completely ignored caution. Many of those who oversaw their drafting and signing had undoubtedly witnessed the bursting of the dotcom bubble and were therefore aware that a new technology market could suddenly take a catastrophic turn. Contingency plans are probably carefully included in the contracts.

But the bull market mentality that seems to have permeated much of the sports industry by 2021 is now likely to be replaced by more bearish sobriety. Andrews says the past few months have provided a “sense of reality” and that “everyone will be a little more careful in the future”. “The eyes weren’t as open last year as they were this year,” he says.

Brand association is also a double-edged sword. Last year, naming your sports stadium after a thriving crypto exchange gave your team an aura of bullish success. It’s definitely less beneficial if your sports arena bears the name of a company struggling to survive. “For sports teams, if their stadium is named after a cryptocurrency – a currency that has failed or has the potential to fail – that is transferred to the team itself,” said Brandon Brown, assistant professor of sports management in New York. University School of Professional Studies.

The aforementioned agreement between the Washington Nationals and Terra is a particularly illuminating example of the changing dynamics between the crypto and sports industries. Terra – a blockchain ecosystem primarily focused on the TerraUSD stablecoin – was in some ways the first domino to fall in what eventually became a general implosion in the crypto market. Stablecoins are designed to remain pegged to the value of the US dollar, but as of May of this year, UST and its sister coin Luna (in stock market terms) entered a deadly spiral.

It’s not entirely clear at this point what caused TerraUSD to crash, but it crashed and now the Nationals are in a tough position: will they continue to cover their stadium with the Terra logo? , promoting the company and encouraging the fans? and visitors to invest in a clearly risky cryptocurrency?

Again, it’s too early to say. But the unfolding of the deal is undoubtedly being closely watched by many in the crypto and sports industries.

Check out The Drum’s latest Deep Dive, The New Sports Marketing Playbook, and learn the tactics used by the world’s largest sports organizations and their elite athletes to stay on top of their game.

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