Crypto Winter and the Future of Sports Sponsorships

Between 2020 and 2021, a cryptocurrency boom led several crypto-oriented companies to enter into agreements with athletic organizations such as the NBA and UFC. One of the bigger deals was blockchain giant Crypto.com signing a $700 million deal with the Staples Center – one of the world’s largest sports and entertainment venues – in Los Angeles. The Singapore-based company also signed deals with the UFC and Formula 1 for promotions in various sports arenas and on athletic equipment.

Crypto.com wasn’t the only crypto company to expand its reach into sports or entertainment. In exchange for naming rights to the Miami Heat’s arena for 19 years, FTX, a cryptocurrency derivatives exchange, paid $135 million. And in an exclusive deal, Coinbase became the exclusive cryptocurrency exchange for the WNBA, NBA and NBA G League.

Into 2022, there was little warning that the crypto winter was coming.

Winter is here

In May, the major stablecoin TerraUSD lost its peg to the US dollar. In just one day, TerraUSD lost $60 billion in value. After that, major crypto lender Celsius suspended withdrawals, citing liquidity issues. The company followed up by filing for bankruptcy.

They were just among the first dominoes to topple in the crypto world, and many others soon fell. As a report by the National Research Group (NRG) on the state of the cryptocurrency industry noted, the market has “declined over 70% from the peaks it reached in late 2021, and many of the most popular coins are trading at less than half of what they were in beginning of the year.”

As the NRG report also notes, the crypto market has undergone “dramatic” corrections in the past. Is the current crypto winter that different? And more importantly, will crypto winter freeze the budding love affair between entertainment, professional sports and cryptocurrency?

According to NRG, “crypto winter” has affected the public’s view of cryptocurrency in various ways.

For example, NRG reports that “70% of consumers feel they have at least a ‘moderate’ understanding of cryptocurrencies”. If accurate, it’s a notable change from a YouGov survey conducted in June 2021 that found 69% of Americans agreed with the statement, “I don’t really understand cryptocurrency.”

On the other hand, at least 61% of respondents said they were aware of “cryptocrash” or “cryptowinter.” It appears that the heavy and negative news coverage of the crypto winter over the past three months has greatly increased consumer awareness – of the crashing market.

NRG notes: “This is no longer a technological novelty; increasingly, having some knowledge of crypto and how it works is seen as an element of basic financial literacy.”

However, although consumers have been exposed to a large amount of crypto news, NRG reports that few bother to do deeper research. Bitcoin remains the most famous name, and consumer awareness of other coins such as ETH, Dogecoin or even popular meme coin Shiba Inu has not increased much since the beginning of 2022. Even with the media attention on TerraUSD de-pegging from the dollar ( arguably one of crypto’s most significant events in recent memory), only 7% of consumers are familiar with the term “stablecoin.”

Crypto Sponsorship Continues… Mostly

Crypto.com’s Al D’Agostino gave a terse response to dot.LA when we reached out for further comment about the company’s affiliation with the Staples Center: “Crypto.com remains fully committed to its sports sponsorships. We are well funded and these are multi-year contracts, which will continue to play a critical role in our mission to accelerate the world’s transition to cryptocurrency.”

While the New York Post reported in late June that FTX had pulled out of sponsorship negotiations with the Los Angeles Angels, the crypto exchange has made new sponsorship commitments with a $210 million naming deal for pro esports team TSM, also known as Team SoloMid.

But as recently as August 2, Voyager’s cryptocurrency exchange backed out of a multi-year sponsorship deal with the US National Women’s Soccer League (NWSL). In addition, the exchange is facing bankruptcy after its CEO made millions at the peak of the cryptocurrency boom in 2021.

In comments accompanying its crypto winter report, NRG’s global head of insights, Marlon Cumberbatch, said “the crypto crash has done little to dampen Americans’ enthusiasm for cryptocurrencies — for investors, the latest crash is just the latest in a long line of ups and downs , rather than the start of a terminal decline.”

Cumberbatch also offered advice on how companies as large as professional sports teams and as small as local businesses can strategize to survive the crypto winter. “Start engaging openly and constructively with policy makers,” Cumberbatch said, “continue to invest in educating consumers about the technology and promoting practical use cases for crypto…”

Cumberbatch also encouraged better cryptocurrency education for everyone. From the C-suite to the penny crypto investor on the street, people need to better understand what they are getting into. “Recent media coverage has done a lot to increase consumer awareness of crypto,” he said, “it’s not the same as increasing understanding. It’s critical that consumers know enough about the technology to be able to make informed decisions and protect themselves from unnecessary risk . . .

Cumberbatch did not immediately respond when dot.LA reached out for specific comment about sponsoring crypto companies like Crypto.com and the Staples Center deal.

Where do we go from here?

The NRG report on the overall state of crypto did not predict doom and gloom, but noted that the crypto landscape “is vast, complex and constantly changing.”

“More than anything else,” the report continued, “recent events in the crypto market have made it clear that there is a need to educate potential investors. Before buying in, it’s important that consumers understand the technology on more than just a surface level – and that they know enough about crypto to be able to make informed decisions and protect themselves from unnecessary risk. And today’s leading crypto firms will have a central role to play in facilitating that educational journey.”

Cryptocurrency exchanges have benefited more from their sponsorship than the sponsored organizations, and at least the crypto winter has put a dent in several multimillion-dollar deals for now. But if the National Research Group’s report proves prescient, this could be a temporary lull in cryptocurrency-oriented companies paying big bucks for widespread name recognition. The Crypto.com arena is here to stay…for now. If crypto winter gives way to a crypto spring, we may soon see more Coinbase stadiums and Bored Ape Yacht Club restaurants.