Driving Innovation: The Collision of Crypto and Formula 1
1. INTRODUCTION
In the weekend of June 22, the Spanish Formula 1 Grand Prix took place in Barcelona. Jarno de Vries, representing Oxido Solutions, attended as a VIP guest of Bybit. He joined over 125,210 fans to watch Max Verstappen’s thrilling victory on Sunday. Previously, I wrote about the limited impact of cryptocurrency on the European Football Championship, but how does it fare in Formula 1?
2. CRYPTO SPONSORSHIP in FORMULA 1
Cryptocurrency companies are the most represented sponsors in F1, with at least $ 85M annually flowing into the sport from the crypto space. Here are some of the biggest sponsors:
Bybit ($50M per year)
Bybit, with a daily trading volume of over $20 billion as of June 2024, is now the second-largest cryptocurrency exchange in the world after Binance. Oxido Solutions and Bybit collaborate closely, and the Bybit trading bot is particularly popular among institutional investors and ultra-high-net-worth individuals. However, Bybit’s partnerships go beyond Oxido, with their standout deal being with Red Bull Racing.
In 2022, Bybit signed a $150 million sponsorship deal with Red Bull Racing. This multi-year agreement, valued at $50 million per year over three years, is described as “the largest per-annum cryptocurrency venture in international sport.”
As part of the agreement, Bybit becomes a principal team partner of the Oracle Red Bull team, second only to the title partner, Oracle. Bybit will also issue fan tokens for the Formula 1 team, helping to expand its digital assets while supporting Bybit’s crypto education initiatives. Additionally, Bybit will serve as the team’s tech incubator partner, working on projects from crypto literacy to promoting green technology.
This deal reflects the growing trend of sponsorship agreements between cryptocurrency companies and major international sports teams. Crypto firms are increasingly investing in branding and advertising through these high-profile sponsorships.
OKX ($15-25M per year)
OKX, one of the top three cryptocurrency exchanges where Oxido Solutions operates its OKX bot, signed a five-year sponsorship deal with McLaren in May 2022, reportedly totaling between $75 million and $125 million.
As part of this partnership, OKX branding has been prominently displayed on McLaren cars during events, as well as on the suits and helmets of McLaren F1 drivers. This strategic sponsorship underscores OKX’s commitment to leveraging Formula 1’s global platform for enhanced visibility and brand recognition in the cryptocurrency industry.
Crypto.com ($20M per year)
In June 2021, Crypto.com became the first cryptocurrency sponsor of Formula 1 with a $100 million deal. The exchange, which Oxido Solutions does not trade on due to low Bitcoin derivatives volume, pays $20 million annually to Formula 1 until 2026. As part of this agreement, Crypto.com will have a significant brand presence at F1 events, including the exciting Sprint series, which sets the starting grid for the main Grand Prix on Sunday. Additionally, Crypto.com branding will be prominent across the Formula 1® Crypto.com Miami Grand Prix campus. The Crypto.com Terrace hospitality area offers 360-degree views of the track, including an exclusive observation deck at Turn 4. This area on the first level is open to all fans attending the event, providing an immersive experience for attendees.
Binance
Since 2021, Oxido Solutions has operated its Binance trading bot on the world’s largest cryptocurrency exchange. In the same year, Binance entered a long-term partnership with the Alpine F1 Team, featuring the Binance logo on Alpine’s F1 cars. Binance also sponsors F1 Alpine parties, showcasing the team’s cars for fans to admire and take selfies with, alongside an extensive racing simulator offering a taste of F1 racing excitement.
Kraken
Kraken, a longstanding cryptocurrency exchange serving over 10 million clients globally, competes fiercely in the world of Formula 1 sponsorship alongside Binance, OKX, and Crypto.com. In 2023, Kraken stepped up as the presenting sponsor for various electrifying Williams Racing Fan Zone experiences. These exclusive fan zones provide unprecedented access to Williams Racing F1 team activities, including driver Q&As, autograph sessions, esports competitions, premium merchandise, and exclusive experiences through Kraken’s Williams Racing Collectibles + Grid Pass.
3. FAN TOKENS IN FORMULA 1
Fan tokens in Formula 1 mark a significant overlap of cryptocurrencies and sports, aiming to bolster fan engagement. These tokens provide fans with unique ways to interact with their favorite teams, though they carry substantial risks due to their volatile nature and reliance on team performance for value.
Participants in the fan token market generally fall into two categories: speculative investors and fans who find gratification in owning tokens, often referred to as ‘fan-investors.’ Despite their popularity, fan tokens typically experience low trading volumes and lack inherent value.
Oxido Solutions opts against developing trading bots for fan tokens due to these market conditions but closely monitors their impact and popularity. Currently, three Formula 1 teams have issued fan tokens: Alpine, McLaren, and Aston Martin. Alpine introduced its tokens on the Binance token platform as part of a 2022 partnership.
Aston Martin and McLaren utilize Socios.com, a blockchain-powered platform, where fans use Chiliz (CHZ) tokens to engage in polls and have chances to win F1 tickets. However, despite initial enthusiasm, the performance of these tokens has been disappointing. Alpine’s token, for instance, has depreciated by 73% since its launch, while Aston Martin and McLaren tokens have seen declines of 95% and 74%, respectively.
These dynamics underscore the speculative nature of fan tokens in Formula 1, reflecting broader trends and challenges in the cryptocurrency-driven sports engagement landscape.
4. WHY CRYPTO COMPANIES CHOOSE FORMULA 1
Why do crypto firms favor Formula 1 for their sponsorship dollars? What draws them to invest heavily in this premier racing series?
Crypto and F1: A Shared DNA
Jarno de Vries, CTO and co-owner of Oxido Solutions, has been a Formula 1 enthusiast since his youth, even co-hosting a Dutch Formula 1 podcast with friends for years. He sees significant parallels between Formula 1 and crypto trading, particularly algo trading: Formula 1 combines sport, engineering, strategy, and data analysis. Calculating a smart pit stop using tire data from you and your opponents can make the difference between victory and defeat. Similarly, algo trading hinges on engineering, strategy, and data. The trader with the best strategy and the most robust IT infrastructure to swiftly execute trading signals on exchanges gains an edge over competing bots. As other bots become more advanced, our trading bot infrastructure, like F1 car technology, must continually evolve to stay competitive.
More Awareness and More Users
A survey by Seton Hall University of 1,500 U.S. adults reveals a growing intersection between sports enthusiasts and cryptocurrency investors, such as Bitcoin and Ethereum. The study found that 57% of households with passionate sports fans have owned digital assets, which is more than double the rate of households without such fans, at just 24%. This explains why crypto companies opt to sponsor sports, but why Formula 1? Haider Rafiqe, Chief Marketing Manager at OKX, explained during the OKX Race Club event at the Singapore Grand Prix in 2023: “The partnership with the McLaren F1 team has significantly boosted OKX’s brand awareness and visibility through impressions (over three billion) from TV and online exposure, along with market exposure leveraging F1’s global reach.”
OKX also reported the creation of 3,000 OKX Web3 wallets during the event, a testament to the impact of activations enabled by the partnership. A post-event survey indicated that 80% of attendees expressed interest in learning more about the exchange, underscoring McLaren’s fan base’s curiosity about Web3 and digital finance:
“This perfectly aligns with our mission to democratize the crypto economy and educate the public about its benefits and opportunities.”
5. CONCLUSION
The collaboration between crypto companies and Formula 1 proves to be a successful and strategic move benefiting both parties. Both sectors share commonalities like a strong focus on technology, strategy, and data analysis. Sponsorship in Formula 1 helps crypto firms enhance their brand visibility and attract new users. For Formula 1 teams, these partnerships provide crucial financial support, enabling further investment in technological and sporting advancements. However, Oxido Solutions expresses concern about fan tokens, seeing them as a risky development where fans could potentially lose their entire investments, which could harm both crypto platforms and F1 teams more than benefit them.
