Rise of Crypto.com: From the College Blog to the Home of the LA Lakers

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Crypto.com started life as a blog post from University of Pennsylvania professor Matt Blaze, who sold the name in 2018 for an undisclosed sum to a little-known crypto startup. – currency and credit cards called Monaco.

Monaco, now a Singapore-based cryptocurrency exchange renamed Crypto.com, has just agreed to pay $ 700 million to sport the title of this blog for 20 years on the Los Angeles arena, synonymous with the teams of Lakers championship basketball and a concert hall for Taylor Swift artists. to Paul McCartney.

The huge sum of money thrown at Staples Center is a demonstration of how the meteoric rise of bitcoin is reshaping the business landscape and how the newly created crypto giants are willing to pay to make money. new retail customers.

Sports sponsorships are an age-old way for businesses to gain notoriety in exchange for fan loyalty.

In June, the Bahamas-based FTX exchange purchased the naming rights to the stadium where the Miami Heat basketball stadium is located and that same month became the official cryptocurrency platform for Major League Baseball and the Seven-time Super Bowl champion quarterback Tom Brady.

AEG, the company that owns and operates Staples Center, is hoping the crypto rebranding works both ways. Todd Goldstein, AEG’s chief revenue officer, said he proactively sought out Crypto.com as a naming partner because they hoped to attract “a portion of their population,” namely younger and older consumers. tech savvy.

“When the shock wears off a bit, there are people who understand it, how good it can be for the arena and how good for the partner,” Goldstein told the Financial Times.

The decision to turn Staples Center into the Crypto.com Arena starting on Christmas Day will also attract further scrutiny of the little-known company as well as questions about its ability to shell out the hundreds of millions of dollars it will need to pay. for the name change.

Kris Marszalek, managing director and majority shareholder, said it was a “simple cash deal”.

Although its brand lacks brand awareness, the privately held five-year company has 3,000 employees worldwide and generated hundreds of millions of dollars in revenue in the second quarter of this year, according to Marszalek.

An artist’s image of the appearance of the renowned stadium

“In the second quarter, we made about a quarter of Coinbase’s revenue and we’ve been profitable since the start of the year,” the boss of Crypto.com told the FT. “The crypto space is extremely hot and we have seen 20x the revenue growth this year.”

Coinbase – which became the only publicly traded cryptocurrency exchange earlier this year with a valuation of $ 76 billion, close to that of BNP Paribas in France – generated $ 2 billion in net income between April and June , exceeding $ 1.6 billion from the previous quarter.

The surge in the price of bitcoin has turned a handful of companies, such as Coinbase, into billion dollar companies riding an influx of new investors and the high margins they can charge.

Rival exchange FTX recently hit a valuation of $ 25 billion in a funding round, rising from just $ 1 billion in February last year. Gemini, the crypto firm owned by Tyler and Cameron Winklevoss, also just completed a funding round that put a price tag of $ 7.1 billion on the exchange.

Unlike traditional markets where margins have shrunk to extremely slim levels, Crypto.com and its peers can charge 0.4% on trades that take place on the site and even more if trades take place on the mobile app. of the company.

Crypto.com makes billions of dollars in cryptocurrency transactions every day and has processed more than $ 415 billion in transactions on its exchange since March of last year, according to data from the analyst firm specializing in cryptocurrency. CryptoCompare digital assets.

That translates to $ 1.2 billion in revenue using an average fee of 0.3%, but the figure does not include in-app transactions where exchanges can charge two or three times as much as at their major sites. . Volumes are not being disclosed for such transactions, making the FT’s estimate of the company’s revenue low, according to the company.

Cryptocurrency exchanges generally charge investors less the more they trade. This prompts retail traders to take bigger risks with their bitcoin and other punches, as in addition to putting more and more money into their accounts, they might be tempted to inflate their transactions using the ‘leverage. Exchanges can also make money using their own digital currencies and lending transactions.

Commentators say the stadium will be dubbed “The Crypt” © Apu Gomes / AFP via Getty Images

Crypto.com, for its part, has a portfolio of rapidly growing sports assets, including Paris Saint-Germain and Italian Serie A in soccer, Formula 1 racing, UFC pro fights and the Philadelphia. 76ers basketball, all signed this year.

He was also “considering” raising funds in a market where conditions were extremely favorable, Marszalek said. Venture capitalists agree. Greg Carson, managing partner of XBTO Humla Ventures, said companies focused on digital assets attract a premium because of their “explosive” growth and the large margins they can charge.

Crypto-skeptics are pointing the finger at the stadium renaming deal as a sign that we are near the top of the market, a suggestion that is being flouted by many in the industry.

But even though crypto itself is at the center of the disagreement, there doesn’t seem to be a preferred nickname for the arena. “You’re going to call it the crypt,” sports commentator Dan Patrick said. “Not Crypto.com or anything.”

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