What the FTX Collapse and Crypto Crash Mean for Marketers

The cryptocurrency world has been thrown into disarray as FTX, one of the industry’s biggest exchanges, filed for bankruptcy last week following a shock liquidity crisis, sending prices of major digital coins plummeting. Like many other cryptocurrency companies, FTX had spent lavishly on marquee advertising as a means of establishing itself as a household name. Its stunning downfall has left a wake of sports facilities in need of new names, teams and leagues short a major partner, and potentially embarrassed celebrity spokespeople. Beyond those immediate implications, the crash will no doubt further shake confidence in crypto-adjacent technologies under the banner of Web3, which have broadly appealed to marketers over the past several months as a way of reaching younger, online-savvy consumers immune to traditional advertising. “You can’t have an event like the FTX crash occur and not have brands naturally become more skeptical of all Web3 activations,” said Jason Carmel, global lead at Wunderman Thompson’s Creative Data Group. “No one reads reports of billions of dollars of assets disappearing and thinks to themselves ‘OK! Where should MY brand play here?’” The Great Fail: Crypto’s Terra-ble Crash How we got here Part of the reason FTX’s collapse has so thoroughly captured public attention is a result of the company’s splashy marketing strategy. FTX—and the cryptocurrency space at large—have worked diligently to establish a feeling among consumers that the technology was part of an inevitable future that one would be foolish to dismiss. That strategy culminated in a Super Bowl 2022 full of crypto ads, in which FTX compared the rise of the technology to the invention of the wheel and the lightbulb in a spot starring Larry David. But even as those ads aired, crypto’s momentum was beginning to falter from its delirious highs the previous fall amid economic fears around rising inflation and interest rates. A liquidity crisis that triggered the collapse of a crypto network called Terra in May sent further shockwaves through the crypto world. Prices had yet to recover when FTX unraveled. The implosion of FTX has irrevocably changed the crypto ecosystem and the communities in itAlex Adelman, CEO, Lolli As research firm MarketCast discovered, FTX’s deliberate placement of its brand alongside blue-chip sports sponsors like Coca-Cola, American Express, Toyota and Verizon helped to confer a similar level of legitimacy on the crypto company’s business. It could bask in their brand equity while convincing consumers, endorsers, schools and teams that its brand was similarly stable. “A lot of companies, whether they’re a new sponsor or a new company or international company, know the value of sponsorship,” said Lyndon Campbell, MarketCast’s corporate svp and general manager of sports, live events and brands. “There is no interruption. There’s no ad blockers.” But while FTX’s high-profile gambit got the public’s attention, it didn’t necessarily translate into user adoption or a more positive perception of cryptocurrency. According to Morning Consult, only 19% of U.S. adults said they owned cryptocurrency in October—the same percentage that said so in January, before FTX’s Super Bowl ad aired. Only 25% of adults anticipated buying any cryptocurrency in the near future, down from 26% at the beginning of the year. When it comes to the concepts surrounding crypto—blockchain, decentralized finance, Central Bank Digital Currencies (CBDC), Web3—less than a quarter of adults are familiar with them. Adults here have negative net trust in cryptocurrency—those who distrust it have a 30-point edge on those who embrace it—and they’re getting actively concerned about it. While those who find cryptocurrency beneficial to society has held at 24% throughout the year, the share that considers it harmful rose from 25% to 31% since January. Support for increased government regulation of cryptocurrency also rose, from 17% to 23%. Startups and investors in the crypto world acknowledge that winning public trust after the fall into disgrace of one of the biggest names in the business will now be even more of an uphill battle. “The implosion of FTX has irrevocably changed the crypto ecosystem and the communities in it,” said Alex Adelman, CEO and co-founder of crypto startup Lolli. “The revelation that one of the most trusted, powerful players in crypto was gambling with customer funds has served as a watershed moment for crypto, wherein the industry now needs to rebuild trust and unify to ensure that this doesn’t happen again.” Crypto Platform OKX Aims to Build Brand Trust Through Responsible Investment Messaging Staying away from speculation Wunderman Thompson’s Carmel said the agency is not recommending its clients divest from Web3 projects despite the news. While brands should be wary of the crypto world’s more volatile corners, he said, the Web3 space encompasses much more than just potentially risky investment vehicles. “That’s like saying we aren’t going to have a database anymore because we read that Experian got hacked,” Carmel said. “There’s simply too much marketing potential for brands in the more stable aspects of Web3, such as gaming, AR/VR and distributed social networks, to throw the entire technology out the window because cryptocurrency exchanges have proven themselves a shell game.” Other brands and agencies have also focused their energy on less high-stakes sides of Web3 technology, like low-priced or free non-fungible tokens (NFTs) with an experience or loyalty tie-in, and metaverse activations. But an association with high-risk speculation has harmed the perception of NFTs among consumers, and some brands are opting to use the underlying technology of digital tokens without calling attention to the actual terminology, according to Teddy Zee, co-founder and chief business officer of startup MintNFT, which has worked with brands like Mattel and Balmain. “Our thesis was always that that was never the way to reach a mainstream audience, that mass adoption was not going to happen through crypto sales,” Zee said.