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Between 2020 and 2021, a cryptocurrency boom led several crypto-oriented companies to ink deals with athletic organizations like the NBA and UFC. One of the bigger deals was blockchain giant Crypto.com signing a $700 million deal with the Staples Center—one of the world's largest sports and entertainment venues—in Los Angeles. The Singapore-based company also signed agreements with the UFC and Formula 1 for promotion at various sports venues and on athletic equipment.
Crypto.com wasn't the only crypto company to extend its reach into sports or entertainment. In exchange for naming rights to the Miami Heat's arena for 19 years, FTX, a cryptocurrency derivatives exchange, paid $135 million. And in an exclusive deal, Coinbase became the exclusive cryptocurrency exchange for the WNBA, NBA, and NBA G League.
Rolling into 2022, there was little warning that crypto winter was coming.
Winter Is Here
In May, the major stablecoin TerraUSD lost its peg to the US dollar. In one day alone, TerraUSD lost $60 billion in value. After that, major crypto lender Celsius suspended withdrawals, citing liquidity problems. The company followed up by filing for bankruptcy.
They were just among the first dominos to topple in the crypto world, and many others soon fell. As a National Research Group (NRG) report about the state of the cryptocurrency industry noted, the market has gone "down over 70% from the highs it reached towards the end of 2021, and many of the most popular coins are trading at less than half of where they were at the beginning of the year."
As the NRG report also notes, the crypto market has undergone "dramatic" corrections before. Is the current crypto winter that different? And more importantly, will crypto winter freeze the budding love affair between entertainment, pro sports and cryptocurrency?
According to NRG, "crypto winter" has affected the public view of cryptocurrency in various ways.
For example, NRG reports that "70% of consumers feel they have at least a 'moderate' understanding of cryptocurrencies." If accurate, that’s a notable change from a YouGov survey conducted in June 2021 which found that 69% of Americans agreed with the statement, “I don’t really understand cryptocurrency.”
On the other hand, at least 61% of people surveyed said they were aware of the "crypto crash" or "crypto winter." It seems the heavy and negative news coverage of crypto winter over the last three months has considerably boosted consumer awareness—of the crashing market.
NRG notes, "This isn't a technological novelty anymore; increasingly, having some knowledge of crypto and how it works is seen as an element of baseline financial literacy."
Even though consumers have been exposed to a large number of crypto news stories, however, NRG reports that few bother to do deeper research. Bitcoin remains the most well-known name, and consumer awareness of other coins like ETH, Dogecoin or even popular meme coin Shiba Inu hasn't increased much since the beginning of 2022. Even with the media's attention to TerraUSD de-pegging from the dollar (arguably one of crypto's most significant events in recent memory), only 7% of consumers are familiar with the term "stablecoin."
Crypto Sponsorships Continue… Mostly
Crypto.com’s Al D’Agostino gave a succinct response to dot.LA when we reached out for further comment on the company's association with the Staples Center: "Crypto.com remains fully committed to its sports sponsorships. We are well financed and these are multiyear contracts, which will continue to play a crucial role in our mission to accelerate the world's transition to cryptocurrency."
While the New York Post reported in late June that FTX had backed out of sponsorship negotiations with the Los Angeles Angels, the crypto exchange has taken on new sponsorship obligations with a $210 million naming deal for pro esports team TSM, aka Team SoloMid.
But as recently as August 2, the Voyager cryptocurrency exchange backed out of a multi-year sponsorship deal with the U.S. National Women's Soccer League (NWSL). In addition, the exchange is facing bankruptcy after its CEO made millions at the 2021 peak of the cryptocurrency boom.
In comments accompanying its crypto winter report, NRG's Global Head of Insights, Marlon Cumberbatch, said "that the crypto crash hasn't done much to dampen Americans' enthusiasm toward cryptocurrencies – for investors, the recent crash is just the latest in a long series of ups and downs, rather than the start of a terminal decline."
Cumberbatch also offered advice on how companies as big as pro sports teams and small as local businesses might strategize to survive crypto winter. "Start engaging openly and constructively with policymakers," Cumberbatch said, "continue to invest in educating consumers about the technology and promote practical use cases for crypto…"
Cumberbatch also encouraged better cryptocurrency education for everyone. From the C-suite to the penny crypto investor in the street, people need to understand better what they're getting into. "Recent media coverage has done a lot to increase consumer awareness of crypto," he said, "it's not the same as increasing understanding. It's critical that consumers know enough about the technology to be able to make informed decisions and protect themselves from unnecessary risk."
Cumberbatch did not respond immediately after dot.LA reached out for specific comments about crypto company sponsorships such as the Crypto.com and Staples Center deal.
Where Do We Go From Here?
The NRG report on the general state of crypto did not predict doom and gloom but noted that the crypto landscape "is vast, complex, and constantly in flux."
"More than anything else," the report continued, "recent events in the crypto market have made it clear that there's a need to educate potential investors. Before they buy-in, it's vital that consumers understand the technology on more than just a surface level—and that they know enough about crypto to be able to make informed decisions and protect themselves from unnecessary risk. And today's leading crypto firms will have a pivotal role to play in facilitating that educational journey."
Cryptocurrency exchanges have benefited more from their sponsorships than the sponsored organizations, and at minimum, the crypto winter has put a dent in more multimillion-dollar deals for now. But if the National Research Group's report proves prescient, this may be a temporary lull in cryptocurrency-oriented companies paying big money for widespread name recognition. Crypto.com arena is here to stay…for now. If crypto winter gives way to a crypto spring, we could see more Coinbase stadiums and Bored Ape Yacht Club restaurants soon.
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The “crypto winter” might be rolling in, but the founders of Food Fighters Universe are staring the storm in the face and boldly claiming now is actually the time to double down on digital assets.
The restaurant does still accept crypto, despite a recent Los Angeles Times article where a reporter described visiting the site and said staff weren’t accepting Ethereum or ApeCoin, the cryptocurrency linked to Bored Apes. Nguyen and Seo told dot.LA the reporter just happened to visit the store when their systems were temporarily down for maintenance, and said they’re still taking crypto as payment.
“It was timing and miscommunication,” Seo claimed. “[The LA Times] happened to stop by when we were in NYC doing an activation with Bored & Hungry and we were accepting crypto payments in New York and there was a technical issue on the west coast we were unaware of.”
“The best time to accept crypto is in a bear market, that’s when you make your most money,” said Nguyen, a restaurateur known best for his involvement in Los Angeles’ Afters Ice Cream chain.
From left to right: Co-founders Kevin Seo, Phillip Huynh and Andy Nguyen. Courtesy of Bored & Hungry/Food Fighters Universe
Seo told dot.LA the restaurant plans to accept more forms of crypto as payment in coming months. And though the co-founders wouldn’t disclose the restaurant’s revenue, Seo noted they had plans to open a second Bored & Hungry location in Seoul, South Korea this fall—the store’s first international expansion.
It’s important to note that accepting crypto isn’t the only thing that makes Bored & Hungry a web3-adjacent enterprise: the restaurant’s theme is based around Bored Ape Yacht Club, the controversial NFT collection from Yuga Labs.
Celebrities like Paris Hilton, Jimmy Fallon, Tom Brady and Seth Green have openly endorsed the apes, while critics (like web designer and Azaelia Banks’ ex-boyfriend Ryder Ripps) claim the project is rooted in racism or Nazi iconography – something Yuga Labs CEO Nicole Muniz strongly denies.
“I think it's just he said, she said, people digging,” Nguyen said when asked about the allegations. “[Bored Ape] is the most popular brand out there, it is what it is.”
In creating the restaurant, Nguyen had to meet the Bored Ape founders and spoke with one of them (he didn’t say which one) to get their official endorsement, and added, “he didn’t seem crazy.”
Despite the unsavory accusations and impending crypto crash, the series of 1,000 humanoid ape cartoons is quite possibly the most popular NFT brand out there, with sales surpassing $1 billion earlier this year. That’s why Nguyen and his team chose to purchase three Bored Ape NFTs earlier this year for roughly $330,000 and theme their Long Beach hamburger joint around them.
The price floor for Bored Ape Yacht Club’s NFTs continues to fluctuate. After peaking at a high of roughly 149 Ethereum in early May, the project is now down to 81.75 ETH. Decrypt reported in June the collection dropped 47%, falling below a $100,000 floor price for the first time since August 2021.
Nguyen said the desire to link with the Bored Ape brand was rooted in its widespread appeal.
“We are going to be gunning for the top 10 [most] popular coins out there,” Seo told dot.LA, while acknowledging the percentage of people actually purchasing their lunch with crypto is still miniscule.
“Adoption is still going to take a long time,” Seo said. “We're going to continue to push it, even though it's being used very minimally. It's not a huge percentage of anything. Some folks want to do it and just having the option feels good, and we hope that that will lead to more adoption.”
Teens crawling the mall—if there are any who still do so—will soon be able to pick up an NFT under the dim lights of Hot Topic.
Toonstar, a Los Angeles-based Web3 animation studio, is joining Hot Topic, Inc. as the retail company’s official Web3 partner, the companies announced Wednesday. Creating NFTs related to Toonstar’s original projects and Hot Topic IP, Toonstar will facilitate NFT sales that can then be redeemed as physical merchandise in stores. The partnership will also include community-driven digital projects and will work with brands featured in Hot Topic to create new Web3 activations.
“We thought (the partnership) was a really good fit for Toonstart and for Web3,” Toonstar CEO and co-founder John Attanasio told dot.LA. “When you look at their community…they're all heavy collectors of both digital and physical goods already. When you think of the NFT world, a lot of it is about collectibles.”
Hot Topic’s teenage and young adult demographic also drew Toonstar to the company, as Attanasio said it matches their current projects, such as Mila Kunis’ NFT show “The Gimmicks,” a workplace comedy series set in the world of regional wrestling. Attanasio said Hot Topic shoppers are often the type to show up to fan events such as San Diego Comic-Con—which is where the partnership will officially launch later this month. Social media brand ambassadors HT Fanatics will be able to cameo in an episode of “The Gimmicks” at the event.
Creators have previously turned to NFTs to encourage their community amongst their fanbases—a theory Toonstar is following with this partnership.
The collaboration marks a shift in the previous trend of incorporating NFTs into retail brands. Clothing companies including American Eagle and Gap have respectively launched a digital clothing shop and an NFT collection. Even high-end brands have explored Web3, with Gucci releasing a series of digital and physical collectibles earlier this year and Prada offering a tying a free NFT to purchases from its Timecapsule initiative. But the Toonstar and Hot Topic partnership allows people to purchase NFT activation codes in stores and online, effectively merging their retail experience with their digital spaces.
As more retailers turn to digital creations, how states will handle sales tax remains up for debate. And as more questions of intellectual property ownership pop up amidst the crypto winter, retailers will have to navigate the changing digital landscape on top of inflation.
Partnering with a retail store provides Web3 companies like Toonstar the ability to “make buying an NFT as easy as buying a shirt in store,” Attanasio said. Such collaborations, particularly focused on the entertainment realm, may also help Web3 reach a wider audience.
“Web3 and NFTs are still very much a niche category, with only a few million people really active in the community,” he said. “Our thesis is that entertainment is going to be one of the things that bring NFTs and Web3 mainstream.”
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