F1 2023: The fall of cryptocurrency sponsorship, like deja vu

Like Bybit with Red Bull, the world of cryptocurrency has entered the world of F1. But the difficulties of some carry the others with them.

Between the announcement of the end of the sponsorship of Velas, with Ferrari, as well as the FTX scandal, partner of Mercedes AMG F1, the economic difficulties of the cryptocurrency world shake the budget of Formula 1 teams in 2023. A story that the discipline had already known twenty years ago.

From 100 to 150 million the investment of the cryptocurrency sector in F1

During the 2022 season, no less than eight companies in the sector were sponsors of F1 teams. For a total investment estimated between 100 and 150 million euros, according to our partner Business Book GP. It is perfectly logical that this sector invests massively in the queen discipline of motorsport, because the messages, technological and futuristic are linked, between the world of cryptocurrency and NFT on the one hand, and that of Formula 1, d ‘another. The fall of FTX echoes the bankruptcies of IQONIQ (which sponsored 3 teams for 2 million euros, at the start), like Bitci with McLaren, which lasted only one year. The agreement with the cryptocurrency and NFT market with the F1 teams is based on two plans: one in cash, the other in derivatives.

An entry ticket set between 10 and 15 million euros

This is how Velas invested in 2022, 20 million euros and planned to add 10 million, in its 2023 contract, with the sale of derivative products on its platform. This two-stage sponsorship, with a first part in cash and a second (often the most important) in derivative products, represents a promise of 10 to 15 million euros for the F1 teams. The duration of the contracts rarely goes beyond three years. As is often the case when there is a new sector emerging in the economy, the F1 teams hope to make it their new resource, in order to compensate or diversify their portfolio of partners. Because they are still very dependent on the investment of their owner.

Back to the future: the telecom sector

Thus the volatility of this cryptocurrency sector is reminiscent of that of telecoms, between 2000 and 2004. At the time, as today, Formula 1 teams aimed to diversify their portfolio of partners, in order to be less dependent on money from tobacco manufacturers. The technology and telecom sector was quickly approached. They were 7 players in 2000, then 9 in 2002, to culminate in 2004, at 11 brands in the sector, for a total of 120 million dollars at the time (190 million today). Vodafone was the biggest, at today’s equivalence, at 75 million euros. At the beginning of the adventure, the average sponsorship of the sector was on average 20 million dollars. Then it dropped to around 17 million four years later. In the end, only Vodafone with its Ferrari sponsorship, then McLaren, really invested in F1. The others have been temporary partners for a season. 22 years later, the telecoms sector in F1 represents a total market of around thirty million euros. A drop of water, after having been an ocean of hope.

F1 2023: The fall of cryptocurrency sponsorship, like deja vu is an article published on Sportune

F1 2023: The fall of cryptocurrency sponsorship, like deja vu