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CRYPTOCURRENCY

Cryptocrash: are sports sponsorships in danger after cryptocurrencies lose value?

The crypto collapse has the potential to scare plans for sponsorship, though future regulation could offer the security needed to protect teams and fans.

Update:
Red Bull driver Max Verstappen celebrates with his trophy after winning the Miami Grand Prix, sponsored by crypto.com.
John David MercerUSA TODAY Sports

The cryptocurrency crash this year is threatening to bring the burgeoning investment opportunity to a staggering halt. Worth around $1 trillion last November, market leader Bitcoin has been brought back down to earth now holding about half of that value. Another significant coin, Terra Luna, was eliminated after its value fell from $40 billion to $300 million, a greater fall that 99 percent, prompting investors to seek suicide prevention hotlines.

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There are real problems that have struck the cryptocurrency market. This could put into doubt many investments many cryptocurrency companies have made into sports.

Back in June 2021, Formula 1 announced a partnership with crypto.com as the official cryptocurrency sponsor of the sport. May 2022 saw the first Miami Grand Prix, also sponsored by crypto.com. Since the partnership was created, the price of a crypto.com coin has gone from $0.75 to $0.20, a fall of 73 percent. Are these investments safe an sustainable in such a market?

These collapses in value off a warning to putting ones investments into one basket. Though with regulation on the horizon, there could be opportunities to avoid the worst of the perils.

Companies are already facing lawsuits over missing payments

Plenty of sports and sports teams have been interested in the crypto space for some time. Marketing divisions are always looking for new ways to grow a brand, and cryptocurrency seems to be the next step for these brands to make headway into the digital world. Like with any investment there are risks. Are the ones for cryptocurrency too large?

One cryptocoin, IQONIQ, is already facing the end of operations after its tokens became worthless as they entered liquidation. The Times of the UK have reported that Spanish football team Real Sociedad are owed $850,000 as well as English Premier League team Crystal Palace beginning legal action against the company. IQONIQ were shirt sponsors of the Eagles.

The inherent volatility in the crypto-space makes forward planning difficult and the recent, but sustained, dip in fortunes could give some pause for thought. One of the supposed benefits of the market is its deregulation, giving companies in coins lots of freedom. However, this leaves consumers at risk while the teams they support advertise products that could leave fans at risk.

In response to the collapse of TerraUSD, US Treasury Secretary Janet Yellen said there should be more regulation of the crypto-space.

“It simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate,” she said.

UK Treasury report last month also laid out plans to regulate cryptocurrency, which it predicted would become a “”widespread means of payment”. While this does bode positively for the long-term future of investment links between sport and cryptocurrency, supporters should be protected by the teams they trust. Future regulation could offer this.

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