If you open the spaces tab on Twitter, you’ll find a plethora of conversations about the crypto collapse – clearly the hot topic of this past week. So what exactly is going on?
FTX is a crypto giant and the embattled cryptocurrency exchange has filed for bankruptcy in the US, seeking court protection as it looks for a way to return money to users. Former boss Sam Bankman-Fried has also stepped down as chief executive, the company said.
In just over a week, his FTX empire has collapsed, shaking confidence in the already troubled crypto market. “I’m really sorry, again, that we ended up here. Hopefully things can find a way to recover,” Mr Bankman-Fried, nicknamed the ‘King of Crypto’, wrote on Twitter on Friday.
As one of the largest advertisers in the crypto space, FTX has garnered mainstream attention via sports sponsorships, celebrity ambassadors and national TV ads. The company has naming rights over the Miami Heat’s home arena, a payment partnership with Reddit as well as commercials with Tom Brady, Steph Curry and Larry David. Ad Age named FTX as a top 10 marketer of the year in 2021.
The spiraling of the crypto exchange, one of the biggest by trading volume and a player in this year’s so-called Super Bowl “Crypto Bowl,” reached a fever pitch on Tuesday when Binance, the world’s largest crypto exchange and one of FTX’s biggest rivals, announced plans to acquire FTX. However, even this deal soon fell apart after Binance took a closer look at FTX’s books, according to The Wall Street Journal. Meanwhile, crypto assets like bitcoin and ether have dropped to levels not seen in two years, and the SEC announced it is opening a probe into how FTX dealt with client funds.
Now, all will tell in who will purchase the crypto giant. However, further worries are added by the fact that FTX, co-founded by Sam Bankman Fried and Gary Wang in 2019, is really two entities: FTX.com—the international exchange; and FTX.US—the United States-based exchange. Both entities share marketing sponsorships. FTX Arena in Miami, for example, is a deal with FTX.US, while a sponsorship of the Mercedes-AMG Petronas Formula One team is with FTX.com. The exchange’s partnership with the MLB contains deals with both entities.
A company could feasibly acquire FTX.com without FTX.US, but whether or not the latter’s deals would remain in place is unclear. What is clear, according to Baghdjian, is that if no party swoops in and buys FTX, the marketing deals don’t stand a chance.
What’s almost certain is that celebrities will be withdrawing their involvement. The practice of using celebrities in crypto marketing has been under fire for some time, but that hasn’t stopped FTX from doubling down with its stars, especially NFL quarterback Tom Brady, who featured in the company’s latest ad in September.
It is the fragility of this situation that has the potential for a longer lasting impact with this FTX case possessing the power to shape the very future of crypto marketing. Crypto as an industry has taken various hits this year but what makes FTX’s collapse different is its unexpectedness. The company was considered one of the most trustworthy firms in the space, keeping a lean, 300-person workforce when others scaled, and avoiding the fallout from Terra when nearly everyone else got hurt.
Bankman Fried sat on the covers of Forbes and Fortune Magazine and became the de facto face of the crypto industry thanks to his lobbying efforts in Washington, D.C. Nevertheless now that even FTX has collapsed, experts fear the chapter of mainstream marketing may be at an end. Many experts have predicted that marketers just won’t be taking any crypto brands for the next 12 to 24 months because of the risk associated.
When it comes to traditional brands operating in or near the crypto world, such events have only increased any existing scepticism around cryptocurrencies and therefore may discourage brands from enabling crypto payment options.
Nevertheless, the web3 community is still alive and thriving and buyers and creators within this field simply won’t be dissolving any time soon. I would say it is still worth investing in the community if intrigued but perhaps the time to buy or sell might be delayed several months.
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