It came somewhat out of the blue in September 2020: Sparta announced a deal with crypto company Knaken, whereby the Rotterdam club received a mini piece of bitcoin for each goal or victory. With this, Sparta was one of the first Dutch football clubs to take a step into the controversial world of digital money.
The deal looked like a gimmick for a long time, until Ajax, Feyenoord and AZ suddenly presented their own crypto deals within a few weeks. Just two years later, on the eve of a new Eredivisie season, the crypto-less clubs are now in the minority; Eleven of the eighteen Premier League clubs have, or until recently, had deals with crypto companies.
A Dutch crypto platform (Bitvavo) has even been one of the six so-called partners of the KNVB football association since May. It shows how quickly crypto has become established in the sports world. At the same time, it underlines the urge for brand awareness of companies that did not exist until a few years ago.
The unregulated digital currencies, which were established outside the existing financial systems, have rapidly become popular. It has spawned a jungle of trading platforms, exchanges and coins, all of which want to get on the radar of the general public.
Crypto Bowl
They have a lot of money for that. At the end of last year, crypto platform Crypto.com paid 700 million euros to rename Staples Center – the sports arena in which the iconic Los Angeles Lakers club plays – for twenty years as the Crypto.com Arena. The American football final Super Bowl was nicknamed the ‘Crypto Bowl’ this year, because crypto companies had massively bought up the expensive advertising time (6.5 million euros per half minute) around the most watched sports game in the US.
Market research firm Nielsen recently calculated that the number of deals between sports and crypto companies increased by 1,100 percent between 2019 and 2021. Furthermore, the Nielsen analysts expect that the crypto world will spend about 5 billion euros on sports sponsorship by 2026.
It is not surprising that economist Teunis Brosens, crypto expert at ING, is fully committed to sports. “There is some overlap between the sports audience and the target audience of the crypto companies,” he explains. According to him, both attract mainly men, ‘who are more 30 minus than 30 plus’. Brosens: ‘And this is a trend that you often see in the tech world: in the beginning companies go all out in winning new customers, regardless of how much it costs and whether they make a loss.’
Sports marketer Ruud van der Knaap of the Triple Double agency sees ‘some parallels’ with the rise of mobile phone providers, which were everywhere at the beginning of this century. ‘But that was a more transparent market and everyone wanted a mobile phone at the time. That is something different with crypto.’
quirks
Van der Knaap refers to the vagaries surrounding cryptocurrencies. For example, the industry, which was estimated at more than 2.5 trillion euros at the end of last year, suddenly lost 600 billion dollars in value in a week at the beginning of May.
ING economist Brosens does not rule out the possibility that a number of smaller crypto companies have since abandoned imminent deals. “Some people speak of a crypto winter,” he says. “That could well be the case, but a few really big exchanges have emerged in recent years, such as Coinbase or Crpyto.com.”
According to Brosens, these are companies that sports clubs can join without fear, despite the recent dip. Sports marketer Van der Knaap endorses those words. The crypto world is here to stay. That is obvious. For example, it is attached to the blockchain technology and that is now really becoming mainstream. A lot of people put money into that. However, it is still very volatile and it is therefore difficult to indicate where it is going.’
For example, the recent crypto dip led to the bankruptcy of crypto platform Voyager, among others. The company had then just been associated with NBA club Dallas Mavericks for five years, which had encouraged fans to trade through the platform. The question is whether they will get their money back. Mavericks owner Mark Cuban came under fire after the demise of Voyager.
Hint of bubble
Furthermore, FC Twente raised eyebrows after a deal with the crypto coin Floki; that currency rose quickly, especially after the deals with Twente and a few other clubs, and then plummeted in value just as quickly. It gave the coin the air of a bubble.
It is not without reason that the Netherlands Authority for the Financial Markets (AFM) has often warned about the risks associated with investing in crypto. Top woman Laura van Geest recently described the sector as a gambling hall.
Ruud van der Knaap emphasizes that it is important that clubs or teams thoroughly research who they are going to work with, so that the trick is not to fall for smooth sales pitch or the temptation of quick money. ‘Because you don’t want your crypto company to be the first to collapse or be linked to shady practices. You have to make sure that you work with the right parties, so that you also show your fans the right way in a world they don’t know very well yet.’
In addition, there is still a lot to criticize about crypto from an environmental point of view. New coins are won through so-called ‘mining’. The more coins there are of a ‘coin’, the more difficult and time-consuming it becomes to create a new coin through calculations. This mining often happens via energy-guzzling supercomputers that run continuously.
Bitcoin, as the most popular currency, consumes about 121 terawatt hours of electricity per year, Cambridge researchers calculated last year. That comes down to the electricity needs of a country like Argentina.
Climate ambitions
That fact goes against, for example, the climate ambitions of Formula 1; the class aims to be climate neutral by 2030. It does not alter the fact that every racing stable now has a crypto sponsor. For example, crypto trading place Bybit will pay 150 million euros over three years to Formula 1 team Red Bull for a prominent place on Max Verstappen’s car.
At the start of this season, F1 team bosses were still questioned about the downsides of deals with crypto companies. Each and every one of them defended their sponsors by arguing that crypto has simply grown too big, making it undeniable by a global sport like F1. In addition, the technical ingenuity in the royal class could actually help make crypto greener, said Max Verstappen’s team boss Christian Horner.
Sports marketer Van der Knaap does not see crypto sponsorship as, for example, the new tobacco advertising. In other words, advertising that was first fully embraced by the sports world, until the shadow sides became too great and it suddenly disappeared.
‘I look at that a bit less melancholy’, says Van der Knaap. “It’s a bit like online gambling. These are just industries that are emerging very quickly, so going through a life cycle and maturing very quickly. There are also parties that fall apart. At a certain point there will be consolidation and you will be left with the strongest players.’
For crypto forerunner Sparta, for example, it is hoped that the sector will continue to grow for a while. The club has now played more than four bitcoins together since the announcement of the crypto deal, as can be seen in the online club wallet. It just might be a future gold mine. Otherwise, at least the club has not suffered a loss.