The Future of Crypto Sponsorship in Sports Despite Price Drops

August 3, 2022

Soccer is one of the most-watched games in the world. Estimates in 2022 pointed out that up to 240 million people play the game and have a registration to prove their skills. Adding the total number of football fans that do not play but have a keen interest in the game, the figure totals billions.

The mouthwatering numbers are reason enough for companies like eToro that offer social investing programs to begin their pursuit of a larger market share by taking a marketing position in club soccer teams plastered all over Europe. However, crypto-based company investments in sports have received threats from one of the largest ever market bearish runs that have seen Bitcoin drop by over 50 percent since its largest rally of over $65000.

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What Is The Influence Of The Money Market On Crypto Stocks?

As other traditional markets realize losses and post stock figures last observed in 2020. The money markets are a haven now, especially the government-backed positions that have some of the lowest risk profiles.

The instruments in this sector, including ordinary bank savings in fixed accounts, government bonds, and mutual funds, are becoming more lucrative than the allure of waiting for dividend payments in a year when companies must spend more to stay afloat because of the increased borrowing costs.

What Is the Impact of a Strengthening USD?

Among the major economies, the US and UK took fast steps to deal with inflation. The UK’s decision came in December 2021 when inflation hovered at 2-3 percent.

The UK and US central banks used their power to determine base interest rates by setting them higher to dampen consumer mood to reverse inflation. Higher interest rates in the US and UK impact the money markets positively, especially the fixed income security segment that also notices a rise in the yield interest rates.

Higher rates encourage foreigners and local investors to rush for the securities, which mature faster and have lower risks. The positive uptick in the investment market for government security in the US did not receive fierce competition from the European Union, which has so far not taken action to control interest rates to tame inflation.

The Euro area current interest rates versus those in North America dampen the hopes of a return to normal in the investment markets soon.

Better returns in the money markets help strengthen a currency. A situation that works against currencies whose respective central banks have not acted to raise rates in the current environment.

However, in July, the European Central Bank (ECB) will make its fast attempt at a rise in interest rates that will see them up by 0.25 percent. The increase is welcome for sports in the European Union that largely depend on the revenues raised by a partnership with eToro.

Are Crypto Company Sponsorships in Danger?

One of the most significant sponsorships of a cryptocurrency-based company in sports happened at the Miami Grand Prix in the US. Formula 1, one of the most-watched auto races in the world, displayed many banners for Crypto.com for a mouthwatering sum.

At the time of the sponsorship, a unit of crypto.com’s stock was at a solid $0.75. However, during the increasing uncertainties revolving around inflation and the steps taken to stem it, the stock had fallen to $0.20. The 73 percent drop is a testament that many firms, including those involved in crypto, will find it harder to sponsor any new sports teams.

However, slides in the stock markets are normal, and soon adjustments will protect the sports sponsorship market.

Bottom Line

Sports sponsorships from crypto firms have a future. In the past, crypto stocks have slid and found their footing soon after. The current slide aligns with other stocks in the market. The intended actions by the ECB are the first to push stocks higher and crypto stocks back to bullish runs. When ECB’s tightening triggers a market rebound, sports sponsorships by companies dealing in crypto stocks will also continue.