What will happen to multi-billion dollar sports sponsorships now that crypto is failing?
In recent months, there has been a downward spiral in the value of cryptocurrencies, and experts are concerned about the estimates. Over the last six months, the total value of all cryptocurrencies has fallen by 70%. The total market value of crypto fell below $ 1 trillion, which is a massive free fall from the top of $ 2.9 trillion.
Ethereum has fallen 75% from the all-time high, while Bitcoin is down more than 65% from the all-time high. The skeptics and critics of crypto have a field day because they have always meant it as a scam, while there is a mindset that believes that the increased interest from the Federal Reserve has caused it, a move made to combat high inflation in the United States.
In sports, there are concerns about sponsorship supported by crypto. It was an estimated $ 1.5 billion in sponsorship deals agreed by crypto companies. This includes exchanges and tokens, and many more. Crypto.com paid around $ 700 million to rename the Staples Center in Los Angeles, while FTX spent $ 500 million north on deals with esports franchise TSM, Major League Baseball and the Miami Heat.
What will happen to these agreements?
There are many issues that plague these agreements. Will these companies be able to pay? Does this mean that the partnership between sports and crypto is over? There are different ways to explain this, as there are a number of outcomes.
FTX and Crypto.com bring in dollars in annual revenue, as they appear to be well-run businesses, so they should be able to pay for their deals no matter what happens. As for FTX, before they signed these agreements, they had to provide growth forecasts and show accounts before they signed the big 9-digit agreements.
The main problem is with teams that took a lot of risk
The reality that cryptocurrencies fall in value is clearer than teams and sports franchises that took quite a lot of risk with crypto. Before the start of the MLB season, the Washington Nationals signed an agreement with Terra that included advertising and signage around a video series. The series explains the crypto published by the team, and the 5-year deal worth around $ 40 million.
Mark D.Lerner, CEO of Nationals, said at the time of the announcement that, “We are excited to partner with Terra to name our most exclusive club and explore bringing powerful new fan experiences to the National Park, including the use of UST cryptocurrencies to make purchases,”
But just a few months later, more than $ 40 billion in value was destroyed overnight when UST, the algorithmic stack coin, fell from the $ 1 link to less than a cent.
At the expense of being tone deaf, the Washington Nationals continued to fulfill their contractual obligation when they posted a “crypto 101” video on their social media account.
The future is still bleak
There are currently almost 20,000 cryptocurrencies, and 99% of them are likely to end up being worth $ 0.
This does not mean that all cryptocurrencies will be bad. However, sports teams and organizations must be masters of risk-taking during beef markets. Professional sports teams must also be careful and do due diligence when choosing marketing teams, while retailers must also be careful when choosing investments.
