Sporting Crypto - May 23rd 2022: Enter Bear Market
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Intro Notes, Plugs & Amendments 🔌🔧
I’ve gathered my thoughts now and feel ready to write about what will be the second crypto downturn that I’ve been a part of.
I’ll write about the macro, crypto itself but also how a bear market will impact the intersection between sports and crypto.
If you don’t know what a bear market is, it’s essentially a period of decline in a market like the one we saw in crypto between 2018 - 2020.
🔌 If you would like me to come to an event and speak about Sports & Crypto / NFTs, please reach out on the above platforms.
🔌 I’m going to be in NYC for NFT NYC at the end of June. If you’d like to connect IRL - hit me up with an email!
🔧 Amendment! DraftKings have already made a big play into NFT Fantasy gaming. Their new product Reignmakers, an NFT Fantasy American Football game, is due to start selling NFTs mid-summer.
This Week’s Deep Dive: What does this bear market mean for crypto in sports?
What’s different about this crypto boom?
In 2017 - 2018, the speculation we saw in crypto was pretty mad.
If you thought this was bad, 4-5 years ago people were putting literally anything on a blockchain, launching an initial coin offering (ICO) and basically going into nothingness after they run out of money.
And there was a lot of retail money there.
There were a lot of people essentially gambling on the next big thing.
"I’ve heard XRP has deals with some banks?”
"This token I bought is apparently going to revolutionise farming supply chains”
Pretty much anything you can think of.
And some of those things did really well.
99% of them - went awfully. Pretty much the same ratio you’d find in angel investing or investing in startups generally.
But there wasn’t really much around, other than speculating. The speculation on what might a protocol do, rather than what is being built or has been built on a protocol.
Even with NFTs, Cryptokitties had literally just burst onto the scene.
What happened this time around?
Two main things happened in crypto, the rest is macro. The macro is something you don’t need me to go into. Covid, fiscal stimulus from governments, supply chain shocks and the rest - I’m probably not more informed than most to discuss the whys external to the actual happenings in crypto.
In crypto you had:
De-Fi (Decentralised Finance)
The area that sports has been impacted most by is NFTs.
In fact, the first thing that really hit the mainstream from an NFT perspective was in fact a sporting one; NBA Top Shots.
NFTs in crypto were fulfilling something that hadn’t been in previous cycles.
It was creating something that people actually wanted.
And sure I wanted (insert token) back in 2018 - but I had no connection with it at all. It wasn’t my favourite player’s moment in a season that I have some emotional tie to.
Crypto suddenly found itself crossing the chasm because one of the things that had come out of it (NFTs) was something that retail actually wanted.
And this chasm hasn’t fully been crossed.
I believe that’s what we’ll see in the next crypto cycle.
This one, however, did cross the cultural chasm.
NFTs have no doubt been the reason for that.
It’s just a Jpeg.
I can right-click and save
These are the memes we see so prevalently, but they’ll be forgotten in the future when use cases are more obvious than community access, collectibles and so on.
For now, many, many people have created, collected and curated NFTs.
There are lots of people who want these things, for very obvious reasons that we’ve discussed in depth in this newsletter.
What will happen in this downturn?
Most of the time, in crypto downturns, you see two things happen pretty much in parallel:
The crap, scammy, cash grabby stuff dies a swift death as money is less frivolous
People who are smart build things that people actually want to use
Crypto has been rife with marketers pretending to know what they’re doing for a little over a year now. Maybe a bit longer.
But selling something, anything, in a bull market - is easy. And makes a lot of people feel like geniuses.
This will be many people’s first experience of a drawdown in crypto and I’ll tell you for free, they are brutal.
If you’re in media, audiences shrink (almost in parallel with crypto charts)
If you’re trying to sell NFTs, expect fewer buyers and less trading.
If you’re doing a sponsorship deal, expect less money, unless you have a rights asset that is industry leading.
Pretty much everything is impacted.
So what will happen with crypto in sports?
Here, I’ll outline some of my rough thoughts on how things will probably play out here, during this down period:
There is less frivolous cash to be spent by crypto protocols, exchanges and companies in general, especially on sponsorships. Naturally, when interest wanes, prices and volumes are down - it impacts the margins of basically every crypto-related company. And these companies love spending money during bull markets, especially on partnership deals, because… well, they work. When you come into a lot of money as well, revenue projections get altered and you need to try and get more customers at the top of the funnel. Sports sponsorships have been massive for a lot of businesses and crypto is no different.
If you’re a CMO and your budget has just been 8x’d, you’re going to try and go for something big.
No one ever really gets a pat on the back from doing a small sponsorship with a sports club no one has heard of.
You go and partner with Miami Heat for 19 years like FTX.
You go and rename the most iconic sports stadium in basketball to the crypto arena.
Those things will happen less frequently during this bull run - but won’t stop completely. The big names - FTX, Crypto.com and Coinbase will still have dry powder. So if the right opportunities come beckoning, don’t be surprised if we still see some mouth watering numbers.
Crappy NFT plays won’t work. They never really have worked for most sports franchises up until this point. Some have done fairly well, like the Utah Jazz in September, but they are the exception to the rule, currently. Liverpool for example launched NFTs and only sold 5% of their entire collection.
The reason for this was multifaceted, but it boiled down to Liverpool not having a good read of the NFT market (issuing almost 200k NFTs in total), creating an offering that just wasn’t desirable and also completely missing the mark on just how their fans would react.
That was in the midst of probably still a euphoric market.
Think about how badly something like that would do in a market with decreasing volumes, less speculation and generally less interest.
Fan tokens fall in price, and many capitulate completely, leading to new models being discovered. A lot of fan token marketcaps have dumped during this crypto drawdown. Because, well, they’re tokens. If Bitcoin and Ethereum are falling, did you think $PSG token was going to do well?
Fan tokens made sports clubs a lot of money. But they likely won’t do in the future. Unless the model is completely uprooted and changed to add further value to fans worldwide.
That all sounds bad…where’s the good news Pet?
Well firstly, the good news is fewer scammy, rubbish projects that sports fans don’t care about.
We’ll also realise quite quickly, which sports brands actually care about this long term.
And the convergence of the two in my opinion will breed better products, experiences and more generally things that sports fans want.
The next wave of crypto will come…
“Either Crypto is dead forever or it isn't. And if it isn't, this is the ultimate washing away of the dodgy shit and weak ideas” - Simon Taylor
The appetite from both sports brands and right holders, and crypto companies and builders in the space - is both great.
It’s now down to them to find more use cases, and follow the likes of Top Shot, Sorare and fellow trailblazers, rather than creating stuff that fans simply don’t give a shit about.
More sports crypto stories & things to put your radar
RTFKT continue to knock it out of the park. Product market fit.
An incredibly dumb article. These are mostly paid in cash, or liquidated upon receiving them.
Dana White announces the UFC is collaborating with Pixel Vault Sports.
Animoca Brands and Manchester City have launched NFTs together.
Sorare land their first Ecuadorian soccer club.
The Bundesliga have extended their deal with Sorare and also signed with OneFootball to help them in the crypto space.
Great reads, great tweeting and more general ‘stuff’ that could impact you
“NFTs are bad for creators and are just scams”
Here’s hoping more sports crypto projects take this approach during this bear market.
Punk 6529 is a must follow for anyone even remotely interested in Web3
An artist who makes $10k a year was put under enormous pressure from his existing fanbase for making an NFT.
That NFT sold for more than four times his salary.
It’s likely changed his life.auction is sitting at 13.37 ETH (~26k USD) i’ve said it before but fans that want artists to be poor aren’t fans. over 100k followers and making under 10k a year is unacceptable. this community is eager to support real art. welcome
jmw327 @jmw327probably gonna try out nfts, dont understand them or why they are controversial, but cant keep making less than 10k a year and so if there is a chance want to be able to afford healthcare and stuff, sorry if it offends you and please do whatever makes you feel comfortable
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This newsletter is for informational purposes only and is not financial or business advice. These are my thoughts & opinions and do not represent the opinions of any other business or entity.2