But as an NBA season and post-season awash in cryptocurrency sponsorships wrapped up this week, the crypto industry faced new challenges. The price of many cryptocurrencies has fallen, with Bitcoin falling to just over $20,000 this week from an all-time high of nearly $69,000 in November. Meanwhile, a wave of layoffs has spread across the sector to prepare for a possible prolonged economic downturn. Now, the optics of these agreements may have changed.
“The influx of spending is unlike anything we’ve seen before. I was expecting it to potentially be a bit more measured, but it’s literally been like a runaway train,” Peter Laatz, Global Managing Director at IEG, told CNN Business. “They were kind of spraying money all over the place.”
According to IEG, just five crypto companies, including Crypto.com, Coinbase and FTX, were responsible for 92% of industry spending that helped the NBA reach $1.6 billion in annual sponsorship fees this season. The company described the spending between companies as “a bit of an arms race”.
Then the market moved. On Tuesday, a day after Coinbase aired its “long live crypto” ad during Game 5, the startup announced the layoff of 1,100 people. In an email to staff, Coinbase CEO Brian Armstrong noted the possibility of a recession, which he said “could lead to another crypto winter and could last for an extended period of time.”
Coinbase said advertising is an integral part of its ongoing deal with the NBA, as the company signed a multi-year deal in October with the league to serve as the NBA’s exclusive cryptocurrency platform partner and the WNBA. “This ad was part of a pre-arranged package that came with our NBA sponsorship,” according to a company spokesperson.
Crypto.com, another cryptocurrency exchange, bought the naming rights to the Los Angeles Lakers stadium in November, a deal worth $700 million. He also signed a multi-year deal to become the Philadelphia 76ers. official shirt crest partner. Crypto.com this week announced the layoff of 260 employees due to the market downturn.
In a statement, the company said it remains “focused on investing resources in product and engineering capabilities to develop world-class products, as well as our strategic sports partnerships and believes they will continue. to play a crucial role in our mission to accelerate the world’s transition to cryptocurrency.”
IEG’s Laatz said the “only thing” he could think of to compare crypto sponsorship deals with was corporate spending activity during the dotcom bubble. everything blew up and the deals disappeared,” he said.
But as long as the sponsorship checks keep coming in, the NBA won’t feel the pain, Laatz said. “Teams…would take that money over and over again,” he said. “Getting it for a few years is better than getting nothing.”
With or without the same number of sponsorship deals in the future, there are other ways the close connection between the NBA and the broader crypto industry can continue, including through NFTs, which are items of digital content related to the blockchain, the digital database underlying cryptocurrencies.
The NBA is involved in the NFT marketplace with NBA Top Shot, a league-focused NFT marketplace that allows fans to buy, sell, and trade basketball highlights, or “Moments.” Top Shot, launched by Dapper Labs, went public in October 2020 and has major investors in the game, including Michael Jordan and Kevin Durant.