How ‘Crypto Winter’ may affect the future of crypto-based entertainment sports sponsorship

Between 2020 and 2021, we were at the forefront of the huge agreements that were entered into between cryptocurrency giants and various sports teams from the NBA to the UFC. In November 2021, blockchain giant Crypto.com signed a $ 700 million 20-year deal to hold the naming rights to the Los Angeles Staples Center. The company also has a long-term agreement in place with the UFC and Formula 1 to make their brand appear in sports venues and on sports equipment.

Other companies such as FTX and CoinbaseCOIN
has also made significant inroads into the world of entertainment, sports and athletics, with FTX agreeing to a $ 135 million 19-year deal for the naming rights to the Miami Heats arena and Coinbase entering into a multi-year deal to become the exclusive cryptocurrency exchange for the WNBA. NBA and NBA G League.

Cryptocompanies had made billions of dollars worth of deals over the past three years, all before the cryptocurrency crash in January 2022. The question for many cryptanalysts and sports enthusiasts is, are these sponsorship deals now in jeopardy?

According to a Crypto.com spokesperson, “Crypto.com remains fully committed to its sports sponsors.” Still, how long can they remain committed in a sustained bear market and, more importantly, in a highly volatile industry?

According to Kaif Bhatty, a stock and cryptocurrency trainer and founder of The Trading Plan, “Cryptocurrencies are the logical next step in the development of economics, and all of these events are necessary to define what its final state will be, but cryptocurrencies go not anywhere, nor are these sponsorships. ”

Will the effects of a shrinking crypto market cause permanent damage?

According to Pew Research, approximately 43% of American men and 19% of American women aged 18-29 have either traded or used cryptocurrency at some point. The number of active cryptocurrencies is declining significantly among 50+ Americans, but it still leaves a healthy number of Americans involved in the world of cryptocurrency in one form or another. These people and the 70% of Americans who enjoy watching professional sports, entertainment and athletic activities are the targets of these crypto-based sponsorship agreements.

In the recent bear market, however, the number of active users is shrinking for obvious reasons. According to Bloomberg, the number of active crypto users is at Bank of AmericaBAC
has shrunk by 50%, as cryptocurrencies have cratered with bitcoin falling above 60% this year. The general consensus seems to be that sentiment among crypto fans has deteriorated. The big question then becomes, how effective big sports and entertainment sponsorships and ads from big names will be in the future if the realities on the ground do not encourage more investment in the market?

Bhatty, who has an academic history in psychology and counseling, tries to explain a possible way forward for the industry; “Although many people have lost massive investments in crypto during this time, the potential to earn massive profits has never really waned.” Bhatty insists: “I recently hosted a trading challenge on my platform, The Trading Plan. We took a trading account from $ 10k to $ 400k in 5 months, all within the bear market. The crypto market is largely driven by sentiment and sentiment is never positive, it fluctuates between positive and negative, and right now the industry is ready and waiting for the stimulus to start a bullish trend again.The big companies know this, they know where the money is and that’s why these sponsorship deals are long term, that’s why these the agreements are not in danger of collapsing. “

Crypto.com’s official statement appears to agree with Bhatty, as a spokesman recently said; “We are well funded, and these are multi-year contracts, which will continue to play a crucial role in our mission to accelerate the world’s transition to cryptocurrency.”

Kryptovinteren; A break or end to sponsorship agreements?

The New York Post recently reported that many crypto companies are withdrawing from sponsorship deals as the market bites harder. The post reported that the cryptocurrency exchange FTX has withdrawn from the negotiations to give MLBs LA Angels jersey patches after the company had originally issued $ 135 million to rename the Miami Heat in March 2021. The exchange is also said to have withdrawn from another patch deal with the NBA’s Washington Wizards.

After a very active year in which crypto companies spent money on Superbowl ads and sponsorship deals, it seems that the industry has gone into what Coinbase CEO Brain Armstrong aptly described as “The Crypto Winter.” However, various companies have responded to this not by risking the sponsorship agreements, but instead by calling back other costs.

Coinbase recently laid off 1,100 employees, about 18% of the workforce, as shares fell more than 75%. Crypto.com has also reportedly laid off 260 of its employees (5%) to limit spending. Although crypto companies do their part to survive, there is no indication that any of them are considering leaving the ship on any of these mega-deals.

“Is cryptocurrency insecure?” Yes, it is, just as everything else in life is. ” Bhatty believes, “My first investment in the market ever was in 2017. As a broke advisor with AmazonAMZN
Truck driver, I invested my hard earned $ 700 in an Alt coin on the recommendation of a steemit influencer and saw that the investment rose to $ 30k in just days. As an inexperienced trader at the time, I held on to it and saw it fall right back to $ 1k. “

He continued, “The first key to thriving in the industry is emotional control and foresight. In my opinion, some of these big crypto companies went too hard and too much into the sponsorship deals. The deals were exorbitant, and this may be why they are being tightened. There is a generation of people who were born into the crypto era, who have become active in it, and who see it as their future.I have personally trained hundreds of them and seen them being pulled out of poverty by the industry.Crypto “may be evolving, but there is no way. If this is a crypto winter, then summer is definitely near.”

Binance CEO Changpend Zhao shared Bhatty’s feelings when he recently boasted that Binance had made wise moves in the crypto sponsorship market. Binance paid a relatively moderate fee of $ 32 million to become the official shirt sponsor of the Italian football team Napoli in October 2021. Perhaps Binance’s frugality is responsible for why the company continues to expand despite the market crisis.

Binance is not the only company that is still making inroads in the sponsorship market. A potential deal is still on the table at Liverpool FC from a major crypto exchange, although the six-time winners of the Champions League seem to be stepping foot due to the market situation. On the other hand, their city rivals, Everton FC, have just signed a “club record” deal with the crypto casino Stake.com as they become Everton’s main sponsor of shirts.

It’s not just gloom and doom in the industry; it seems that sponsorship of sports and entertainment is still happening, but on a smaller scale. Maybe Bhatty is right, and these mega deals were bad advice. But the fact that the future of technology and innovation, like the metaverse, requires the use of cryptocurrency is enough to ensure that the virtual currency can withstand a complete crash. Whether it will reach the heights again in 2021 remains to be seen, but the general feeling, for the time being, seems to be, “this too will pass.”