Crypto Industry’s Support for Formula 1 Endures Amid Crisis
The new season of Formula 1 started off in Bahrain this March, and it looks like almost 40% of the teams have lost their crypto sponsors compared to the 2022 season. The ongoing crisis has led to a decline in marketing activity among the players, but it’s still too early to say that it has come to a complete halt.
The Formula 1 season has started with a record-breaking 24 Grand Prix races on the schedule, promising to be just as thrilling as last year's events. However, the legendary racing atmosphere is no longer infused with crypto enthusiasm. Just a year ago, all the major Formula 1 teams boasted at least one cryptocurrency sponsor. And in the spring of 2022, the blue logo of Crypto.com even appeared on the race tracks at the Miami Grand Prix. The exchange has been sponsoring the league as part of a five-year deal worth $100 million since 2021.
In the fall of 2022, it became clear that the crypto winter started to set in. For example, Singapore's regulator, where one of the races took place, allowed teams to display crypto logos only on their cars and uniforms. Additionally, the prolonged bear market has caused cryptocurrency companies to become more reserved and scale back their sponsorship programs. While deals are still being signed, there are fewer of them.
The new Formula 1 season has demonstrated that the significant decline in revenue has dampened the enthusiasm of cryptocurrency companies to send positive signals to the market. Meanwhile, the reputational damage due to cryptocurrency bankruptcies is beginning to affect race car drivers as well.
Several of the top F1 teams are currently without any crypto sponsors
Source: Bloomberg
Mercedes found themselves in a tough spot after entering into a partnership with now infamous crypto exchange FTX. After the exchange's bankruptcy, Mercedes swiftly removed FTX logos from their cars the very next day. The partnership agreement, signed in 2021, was unilaterally suspended by the racing team. The sum of the dissolved deal was never disclosed. However, during legal proceedings, it was revealed that Mercedes was among the 50 largest creditors of FTX. In other words, the bankrupt exchange did not fully honor its obligations to the racing team. As a result, Mercedes entered the 2023 season without the support of crypto sponsors, which is entirely understandable.
In January 2023, Ferrari terminated their long-term agreement with Swiss blockchain technology firm Velas. The Williams Racing team also ended its partnership with the Virtua metaverse, while AlphaTauri ceased collaboration with the Fantom platform.
In the semi-finals, Alfa Romeo's sponsorship deal with cryptocurrency lender Vauld also came to an end. In the summer of 2022, the company announced that it was suspending operations and considering restructuring due to financial difficulties. According to court documents, Vauld owes around $402 million to its creditors. Additionally, Alfa Romeo terminated their contract with meme token Floki. However, the team still partners with fan token issuer Socios, platform Everdome, and cybersecurity company CryptoDATA.
The partnership between reigning world champion Red Bull and the Bybit exchange continues to flourish. Experts have hailed it as one of the biggest deals in international sports, estimated to be worth $150 million. However, Red Bull no longer works with Tezos, while their agreement with British team McLaren, which is also sponsored by crypto exchange OKX, still stands.
It's becoming increasingly clear that cryptocurrency companies are finding it harder to act as generous sponsors in the midst of ongoing market turbulence. Cryptocurrency is leaving the world of auto racing as the sector tries to strike a balance between aggressive marketing and its real financial possibilities. If the “bulls” don't replace the “bears,” the pool of crypto sponsors in Formula 1 could shrink even further before the end of the 2023 season.
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