Last year, an influx of sports organizations signed agreements with cryptocurrency exchanges. Now that the crypto market is in crisis, the gold rush mentality has stalled. The drum looks at oneis part of our in-depth sports marketing analysis.
2021 may very well be remembered as the year when crypto first became mainstream. Bitcoin, the world’s leading cryptocurrency, reached a record high of over $ 68,000 in November. That same month, the total valuation of the crypto market exceeded the staggering $ 3 billion figure. The future of cryptocurrency looked bright.
Based on their success, a number of cryptocurrency companies ran ads during the last Super Bowl, each costing millions of dollars. One of them – an FTX ad with Larry David – seemed to suggest that the invention of crypto was as historically significant as the wheel or the coffee, and that someone who was unable to understand it was a clumsy curmudgeon and interrupted. The other, a Crypto.com ad featuring Matt Damon, urged viewers to “seize the moment and get involved” by investing in crypto.
FTX Arena, home of Miami Heat / Adobe Stock
But it wasn’t just during the Big Game that cryptocurrencies flexed their newfound wealth. A number of them have also signed important agreements with leading sports organizations. E.g:
In March 2021, cryptocurrency exchange site FTX signed a $ 135 million deal for the naming rights to the Miami Heat Arena, and changed it to FTX Arena.
In June 2021, Crypto.com became the official crypto sponsor of Formula 1.
In October of that year, Coinbase became the official crypto exchange site for the NBA, WNBA and NBA G League (NBA minor league).
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In November, at the height of the crypto boom, it was announced that the Staples Center in Los Angeles had been renamed the Crypto.com Arena.
Also in November, MLB’s 2021 American League MVP Shohei Ohtani was named brand ambassador – and was nicknamed “The Great Cryptohtani” – by FTX.
In February 2022, the Washington Nationals signed a $ 38 million deal with blockchain company Terra, which includes advertising on the stadium and construction of the Terra Club, described in the press release as a “first club spot behind the home plate.” .
In April of this year, the Dallas Cowboys became the first NFL team to enter into an official partnership with a crypto company when it signed an agreement (valued at $ 6.5 billion) with Blockchain.com.
Why the sudden rush from crypto companies to partner with sports entities? For the same reasons, new brands have always sought to market themselves in the world of sports – the massive audience and fan loyalty that brands can exploit by associating with a particular league, team or athlete. Sport is marketing’s big league. In particular, the Super Bowl can help lift a brand from obscurity to star status.
In other words, the sports world provided cryptocurrencies with the keys they needed to open the hearts and minds of the masses. “[Sports deals] make a splash in the market and that’s exactly it [crypto] brands need, ”says Jim Andrews, founder and CEO of A-Mark Partnership Strategies, a company that specializes in helping brand marketers navigate partnerships. “It’s a murky area, and there are still tens of thousands of people who do not really understand what crypto is … [these deals] help them become familiar with their brand names. »
Then, from the spring of 2022, the sunny sky got darker and the so-called “crypto winter” set in. coins as Bitcoin falls. Wealth has been wiped out. Many famous crypto evangelists have become conspicuous and suddenly brought to silence. Large crypto-exchange companies have begun to lay off dozens of employees.
There are many in the crypto world who insist that the current crash is nothing to worry about. This is par for the course, they will say; hold on for life (HODL) and “buy the dip”. Coinbase even ran an ad, “Long Live Crypto,” during the NBA Finals in May, which basically claimed it was foolish to stop betting on crypto just because the market has a small problem. On the other hand, some economic experts would say that this crash is fundamentally different and more serious than previous recessions.
Time will tell which side is right. If the crypto market returns, crypto evangelists (at least temporarily) will be confirmed, and we’ll likely see a series of messages from crypto companies pushing the message, ‘We told you so.’
Right now, the world is holding its breath, waiting to see what will happen to the crypto market. It is certainly unlikely that large sports organizations will sign agreements with crypto exchanges as long as the latter struggle to keep their heads above water. “We are not going to see the agreements we saw in 2021 being signed in 2022,” Andrews says.
That is not to say that the contracts born last year completely threw caution into the air. Many of those who oversaw their drafting and signing had undoubtedly been through the bursting of the dot-com bubble and were therefore aware that a new technology market could suddenly take a catastrophic turn. Contingency plans were probably carefully inserted in the contracts.
But the bull market mentality that seems to have permeated much of the sports industry by 2021 is likely to now be replaced by more bearish sobriety. Andrews says the last few months have given a “sense of reality” and that “everyone will be a little more careful” going forward. “The eyes were not as open last year as they will be this year,” he says.
Brand association is also a double-edged sword. Last year, naming your sports stadium after a booming cryptocurrency exchange gave your team an aura of bullish success. It is definitely less favorable 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 – it 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 provides a particularly shining example of the changing dynamics between the crypto and sports industries. Terra – a blockchain ecosystem primarily focused around TerraUSD stablecoin – was in some ways the first domino to fall into what eventually became a general implosion in the crypto market. Stablecoins are designed to remain tied to the value of the US dollar, but from May this year, UST and its sister currency Luna (in stock market language) went into a death spiral.
It is not entirely clear at this time what caused TerraUSD to crash, but it crashed, and now the Nationals have found themselves in a difficult position: do they continue to cover their stadium with the Terra logo? , thus promoting the company and encouraging the fans? and visitors to invest in an obviously risky cryptocurrency?
Again, it’s too early to say. But the unfolding of the deal is undoubtedly closely monitored by many in the crypto and sports industries.
Check out The Drums latest Deep Dive, The New Sports Marketing Playbook, and learn the tactics used by the world’s biggest sports organizations and their star athletes to stay on top of their games.