Formula 1 Crypto Sponsorships Collapse

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Over the past few years, cryptocurrency sponsorship has flowed into Formula 1 at an astonishing rate. Nine of the ten teams have some sort of crypto deal, with Haas eventually joining that list with an NFT deal last week. Deals have taken many forms, from simple sponsorship deals with cryptocurrency exchanges to complicated ties that actually create a currency that is somehow tied to being a fan. of Alfa Romeo F1. There are so many crypto offers that it can be hard to follow, which is good because if you followed them all and invested your money in each F1 cryptocurrency individually on the day the offers were announced, you would have lost most of that money by now.

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This particular data point comes from Twitter user Formula Netflix, who checked the prices of seven crypto investments linked to F1 sponsorship deals on the day they were announced and calculated how much money an investor would have lost had they invested at that time. Every property they list has been a major waste of money since these deals began, marked by a catastrophic collapse of Mercedes’ main sponsor, FTX.

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This particular agreement was signed last September. The token linked to FTX, called FTT, is not traded on any traditional exchange, but a single unit of a cryptocurrency that represents an investment in the company was worth about $50 at the time. Now after a sudden collapse and a failed acquisition deal with another F1 team sponsor, Binance, the coin spent the day fluctuating between $2 and $4. If FTX ends up insolvent, a very real chance considering the company’s famous CEO spent the day apologize for a financial disaster in a Twitter threadMercedes AMG F1 would potentially lose this Company F1 estimated at a $27 million sponsorship deal. It’s still pending, though; sports business Logreports Adam Stern cars will race with FTX logos this weekend as usual.

What should be alarming for F1 teams is that FTX was among the most notable names on the grid, with a huge footprint in the industry and massive marketing spend that went far beyond the confines of the car race. Ferrari’s crypto partner, Velas, is perhaps most notable outside the cryptocurrency world for having a partnership with Ferrari. The Swiss company is proud of this partnership (estimated at 20 million dollars per year, Company F1) in all of his social media bios. Velas is blockchain technology, rather than a cryptocurrency exchange like FTX, but we can track the value of Velas through the value of a token, called VLX, similarly tied to it. When Ferrari announced an agreement with Velas on December 27 last year, VLX was worth $0.39 per token. This quickly reached an all-time high of $0.55 on January 4; now, the coin spent the day floating around $0.03.

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The teams aren’t the only parts of the F1 ecosystem affected by the volatility in the cryptocurrency market, however. Formula 1 itself has a partnership with Crypto.com, an exchange that has made waves with massive investments in the sports world. Their deal with F1 is worth $100 million over five years, announced in June 2021. At the time, Crypto.com’s “Cronos” token was worth $0.11. It is now worth a reasonable $0.09, but only after hitting an exponential high of $0.89 and crashing.

Each of these tokens could suddenly explode in value overnight. Even FTX, a company seemingly so doomed that the CEO tweeted in all caps that he didn’t mean what he said ‘in a technical or legal sense’ earlier in his own Twitter feed, could still bounce back and fulfill his contract with Mercedes AMG F1. However, each of these trades is a risk exposure for teams in a series that are too accustomed to risk. Like deals with future Red Bull fighter Rich energy or the stock market predicts Moneytron before that, a crypto sponsorship risks simply disappearing in the middle of a long and expensive engagement that provides a team with the cash they need to operate and compete.

Worse still, these types of deals erode trust between F1 teams and their fans, diluting the value of any racing sponsorship even as audience size explodes. After all, if the best team in all of sport tries to sell us on a crypto exchange whose CEO is currently attributing its impending insolvency in part to “internal mislabelling”, why should we trust them to partner with high quality oil or tire companies?

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