Miami’s maiden F1 Grand Prix in May of 2022 sponsored by Crypto.com was greeted with fanfare and scepticism, as fans of the new circuit looked forward to the race around the Hard Rock stadium car park while purists scoffed at gimmicks such as the fake marina and outrageous ticket prices.
But while many took time to cool off in the fake marina, another F1 storyline was brewing in Miami.
That was the rise of the influence of cryptocurrency in Grand Prix racing, with Crypto.com sponsoring the race, whilst Mercedes’s sponsor FTX adorned the side of the car’s rear wing with an NFT design.
Five months later, FTX is in financial ruin, Crypto.com pulled out of a sponsorship deal with the UEFA Champions League, and Ferrari’s crypto sponsor Velas suffered financial difficulties in the summer.
So how did Formula 1’s much-heralded new tobacco turn into a money-losing mirage?
The comparisons to tobacco
For the first 60 years or so of Grand Prix racing, sponsorship was limited to the hoardings around the track, with cars donning their national colours to help them stand out.
But in 1968, Gold Leaf signed a sponsorship deal with Team Lotus which would change the sport’s look forever.
Gold Leaf’s arrival opened the floodgates for other tobacco companies to enter F1, giving teams financial stability as the sport continued to grow.
But after 23 years of excess, the death knell for tobacco advertising began in France when the Loi Evin was passed banning tobacco advertising, forcing young French drivers and teams, who weren’t eligible for government, support to search for alternative backing.
By the 2010s, all tobacco advertising was phased out, opening the door for new companies to enter the sport.
While some of that shortfall has been met by firms from the technology and software industries, such as Cognizant and Darktrace with Aston Martin and McLaren, respectively, it is crypto companies which have emerged in the last few years as the primary sponsor of F1 teams.
From 2021, nine of the ten Formula 1 teams have signed contracts with crypto companies, branching out into NFTs as well, to help further ram home the point of how significant an influence the burgeoning industry had in the sport.
But these companies have been loss-making machines since January of this year, with most of the companies sponsoring Formula 1 teams now trading at just over 30 cents on the stock market.
In a recent study conducted by Sports Illustrated’s FanNation, nearly all cryptocurrencies’ value has massively shortened.
For example, the value of 10 tokens by Tezos, who sponsor McLaren, was valued in January at $45; ten months later, the value of those same coins is $12.
The value of 10 of Alpine sponsor Binance coins have dropped from $5,000 at the start of the year to $2,782, 10 of Aston Martin’s sponsor Cypto.com’s Cronos are now valued at 80c from $5, and Alpha Tauri’s crypto sponsor Fantom’s tokens have dropped from $26 to a pitiful $2.50.
Throw in Mercedes sponsor FTX which lurched to bankruptcy after Binance pulled out of a potential takeover of the troubled company, and it’s no wonder that teams are sweating on the future of cryptocurrency.
However, not everyone is panicking, as Mattia Binotto said that Ferrari will continue to monitor the progression of Vela when speaking to Total Motorsport.
“Certainly something we need to be careful about,” Binotto said, “we are monitoring at the moment. It’s the only thing we can do. It’s very difficult to predict, but so far, everything is stable and not an issue.”
Crypto bubble pops and the fall of NFTs
FTX’s chapter 11 bankruptcy and nearly every other crypto company’s severe devaluation surely mean that more companies will follow suit in having to cancel sponsorship contracts with sports teams and competitions.
The past month’s events also spell the end for the widely mocked NFTs whose animal excrement-esque colour patterns will not be missed by anyone who didn’t recognise the damage they do to the environment, or the stupidity of them in part due to their easiness to copied without any financial contribution.
With some countries also banning crypto advertising despite nearly all of these companies being a part sponsor on the car, the only silver lining is that no team will be substantially affected by the crypto bubble popping.
But it leaves many motorsport outfits returning to the drawing board on how to drum up more sponsorship in increasingly challenging times for sport.
Additional reporting by Matt Neill