The mainstream influence of cryptocurrencies seems to suggest that it can contribute beyond the financial domain. Post breakthroughs in cryptocurrency and blockchain prospects, businesses started tapping into cryptocurrencies’ potential for sponsorship strategies. As per numbers provided by Euromonitor International, a market research and intelligence firm, crypto sponsorships witnessed an upward trend in 2020-21 by recording a 900% rise across global top-flight competitions. In the same period, the crypto/property sponsorship ratio increased averagely from five percent to 59%, which implies that cryptocurrencies can offer more than it meets the eye. “Post 2021, I believe the global surge in cryptocurrency adoption has witnessed collaborations between crypto platforms and sports and entertainment figures. This shift aims to mark a departure from cryptocurrencies’ niche status to becoming avenues for endorsements and partnerships. Although this trend is yet to gain traction in India, the potential for its emergence looms with regulatory clarity,” Edul Patel, CEO, Mudrex, a crypto-investing platform, told FE TransformX.
Over the years!
It’s believed that cryptocurrencies, such as Bitcoin (BTC) and Ether (ETH), have found their way into sponsorships after an increase in their publicity. From what it’s understood, brands have taken to cryptocurrency sponsorships on account of their ability to be digitally seamless. Going by market reports, benefits related to such sponsorships include increase in international presence, revenue growth over diversification of cryptocurrency portfolios, and lower transaction costs. However, the main advantage of cryptocurrency sponsorships is considered to be their ability to expose sports and esports companies to a wider audience, as it can lead to more business partnerships. From a content standpoint, cryptocurrency sponsorships have emerged as a means of direct funding for related platforms.
Interestingly, Matthew Hughes, a marketing manager at Amplar Health, wrote on LinkedIn that cryptocurrency exchanges such as Crypto.com and FTX sponsored more than one billion dollars in 2021. Additionally, other international companies such as Tezos, Coinbase, eToro, among others, also contributed towards the landscape. Reportedly, Crypto.com entered into a couple of sponsorship agreements, namely a three-year deal valued at $29.5 million with Paris Saint-Germain, a five-year deal worth $100 million with Formula 1, a 10-year deal of $175 million with UFC, and a 20-year deal at $700 million with LA Lakers’ stadium. Moreover, Crypto.com inked a $175 million deal with FIFA to be the exclusive cryptocurrency partner of the 2022 World Cup. In recent developments, OKX, a cryptocurrency exchange, enlarged its collaboration with Manchester City FC, which will take the current Premier League champions at the receiving end of over $70 million during a three year timeline.
Data provided by IEG’s Sponsorship Intelligence Database, a consulting firm, mentioned that cryptocurrency sponsorships’ value went up from two million dollars for the 2020-21 season to $130 million for the 2022-23 season. On that basis, the increase in value portrayed a 6,400% hike on a yearly basis. The firm also highlighted that the value of NBA sponsorships depicted a 12% rise during the 2021-22 season, reaching a sum total of $1.64 billion. In terms of data provided by GlobalData, a data analytics and consulting firm, there were 230 live cryptocurrency sponsorship agreements in the sports industry for 2022, having a $742 million value, with North America leading the race in the landscape. Reportedly, the sports segments which clocked the maximum number of sponsorship deals included cricket, basketball, esports, MMA, motor sport, football, among others.
“I think the appreciation in virtual digital asset (VDA) prices was the key source of value generation in 2021. Crypto platforms seemingly had a strong ‘assets under management’ (AUM) backing which they used to deploy for sponsorships. Some platforms also had VC backing which gave them a cash position.Going forward, we believe that the influx of institutional money into crypto, including as investments in companies, will drive sponsorships in the space,” Vikram Subburaj, CEO, Giottus, a crypto platform, specified.
The road ahead!
According to Statista, a data and business intelligence platform, crypto and blockchain firms are expected to make a five billion dollar worth investment in sports sponsorships by 2026. The platform also stated that the number would highlight a 778% rise in investment for this brand class since 2021. PYMNTS, a data-based platform, has shown an approximately 7,100% rise in cryptocurrency sports sponsorships in the last four years. For 2023, market experts believe that cryptocurrencies’ mainstream usage has gone up over increased interest by institutional investors, which is expected to heighten the number of cryptocurrency sponsorships in the next two to three years.
A latest report published by Nielsen, a consumer intelligence firm, emphasised on two points necessary for progression of the cryptocurrency sponsorship market, them being fan engagement and legitimacy. Data from market research has shown that BTC and ETH will both have a part to play in this context. Recent data published by CoinDesk, a crypto-based media and data company, showed that BTC and ETH generated over $400 million from open trades for liquidation, the highest since August. In recent times, BTC crossed $36,000 and $37,000 since May, 2022, before closing in on the $38,000 level. Even ETH overtook the $2,000 level for the first time since April’s Shanghai upgrade.
Moreover, future predictions indicate that more cryptocurrencies, along with non-fungible tokens (NFTs), will find their way into sponsorship plans. Market reports have shown that decentralised finance’s (DeFi) importance will be key in fragmenting future cryptocurrency sponsorship deals. “The bull run which seems to be driving buzz in the crypto industry will be upon us soon and we should see a shift by brands who have been otherwise conservative in their promotional activities. The revenue that bull runs will help generate the platforms should compensate for the spends on big ticket sponsorship deals. However, regulatory hurdles might pose challenges as governing bodies might introduce new laws based on market participation and user demographics,” Rajagopal Menon, vice-president, WazirX, a cryptocurrency exchange, concluded.
