Another race calendar is underway with excitement filling the paddock. Th current buzz in sports surrounds digital currencies and their push into sponsorships. This month we will look at that optimism and how motorsports is part of the plan.
One may ask – what is all this funky terminology. Basically, crypto is a digital asset based on a network that is distributed across a large number of computers.
The blockchain technology behind will disrupt various industries. Their advantage will be cheaper and faster money transfers. Price volatility and potential use for criminal activity is a less favorable characteristic.
Crypto exchanges and blockchain-based businesses are pouring money into sports like never before. The reason behind this effort is to acquire new customers and bring this increasingly popular digital asset class into the mainstream.
They have quickly become one the largest sponsors and advertisers in sports. It seems that new announcements are made weekly. Sports are embracing the category looking to offset substantial losses incurred during the pandemic.
These deep pocketed companies are seeking to utilize the high visibility of sports to grow awareness of their emerging brands in a relatively new industry. It can be a confusing category, so they need to create legitimacy.
Sports fans are about twice as likely to be familiar with cryptocurrency then non-fans. Those who are avid, engaged in fantasy leagues, and betting types top the lists as those acquainted with this category.
They are not just looking at spectators, they are reaching out to industry stakeholders – leagues, teams, players, etc. Technology is behind every process of business and they want to be part of it.
Sports betting is expanding due to the landmark decision striking down the federal ban of sports gambling three years ago. Almost half the country has begun the process of legalizing sports betting with either in-person or online. There are about a dozen states that have deep-seated political opposition or complex tribal relationships.
Gaming and fantasy entities are spending on sports, but they are subject to regulatory approval. This may slow their adoption and be a barrier to entry.
The primary digital currency business entering sports sponsorships are crypto exchanges. These marketplaces facilitate the buying and selling of bitcoin, ethereum, and dogecoin.
Similar to the philosophy behind stocks, purchase them and hope the price rises and sell at a profit. Investing carries risks, but volatility creates both winners and losers.
The cost of obtaining new users to getting them to use the digital trading platforms via sports sponsorships and advertising is viewed as lower than other forms of customer acquisitions.
Motorsports is receiving money from this space.
The largest deal to date is Crypto.com. This Asian based cryptocurrency exchange has signed a deal with Formula 1 for $100 million over five years. It recently became the naming rights sponsoring of the inaugural Miami Grand Prix. In return they receive race partnerships and hospitality area branding.
The opening race at Daytona International Speedway brings out new backers. Several teams announced detail with crypto sponsors. These deals will feature logos and increased visibility as the new Next Gen cars takes the track.
Nascar disallowed the prospective sponsorship of LGBcoin as the “detrimental to the sport” based on its ties that were in political.
The unfamiliarity of digital currency may create an initial hesitancy of those in motorsports. Time will tell if it goes mainstream but racing will be there as they are already in the fast lane.