The slide that resulted in the loss of $270 billion in bitcoin market value calmed Friday, but industry experts still expect the catastrophe to have some influence on sports.
Over the last few months, the largest three cryptocurrency exchanges — Crypto.com, FTX, and Coinbase — have committed hundreds of millions of dollars to cooperation partnerships with major sports organisations and clubs.
Exchanges take a percentage of each transaction, thus when the price of a cryptocurrency falls, so does the cut made every transaction.
According to industry experts consulted by Front Office Sports, the sponsorship relationships with the major exchanges are not in jeopardy. However, the rate of new partnerships had reduced before the recession, and volatility is projected to worsen in future deals.
Web3 — which includes NFTs like those traded on NBA Top Shot — has been a boon for sports.
In November, Crypto.com agreed to pay $700 million for the naming rights to Los Angeles’ Staples Center over a 20-year period. It also has long-term contracts with the UFC and Formula 1.
while the FTX agreed to a 19-year, $135 million deal to name the Miami Heat’s arena.
Coinbase also signed a multi-year agreement to become the NBA, WNBA, and NBA G League’s exclusive cryptocurrency exchange.
“Crypto.com remains fully committed to its sports sponsorships,” a company spokesperson told FOS. “We are well-financed, and these are multiyear contracts, which will continue to play a crucial role in our mission to accelerate the world’s transition to cryptocurrency.”
How it Could Impact Sports Sponsorships
The sports sponsorship industry will be prepared for the fallout as well, after more than $200 billion of the cryptocurrency market was sold out in a single day.
As previously stated, cryptocurrency exchanges such as Crypto.com, FTX, and Coinbase have made a slew of deals with major sports leagues and teams in recent months.
However, those same exchanges — which take a percentage of each transaction — have seen their percentages of each transaction tank as the value of Bitcoin, Ethereum, and other cryptocurrencies have plummeted dramatically.
“I am not worried about it in the big picture,” said Josh Olin, a veteran crypto trader, and fraud expert. “The question is what kind of a winter is this? Is it a two month-winter or is it a two-year winter?”
Mark Cuban, the owner of the Dallas Mavericks, seemed unconcerned about the future of cryptocurrency, comparing the upheaval to the tech bubble fall two decades ago.
“Crypto is experiencing the slowdown that the internet experienced,” Cuban tweeted on Monday.
Several corporations that had put advertisements for Super Bowl XXXIV in January 2000 were destroyed in the disaster. Many of these businesses, including Epidemic.com and Pets.com, went bankrupt later that year.
FTX and Coinbase both ran advertisements during Super Bowl LIV, for which NBC charged $6.5 million per 30-second space.