Explaining the FTX crash and the Sixers’ ties to the crypto industry in less than 4 minutes

All eyes are on cryptocurrency right now as the industry is reeling from the fallout of FTX, one of its most notable exchanges, which saw about $9.4 billion worth of crypto trades every day.

Here’s what you should know about cryptocurrencies, the FTX collapse, and the ties between the Sixers and the broader crypto industry.

» READ MORE: How Philly investors are faring in the wake of crypto firm FTX’s collapse

Cryptocurrencies are digital currencies built or based on blockchain technology. That means each transaction made using a cryptocurrency — like bitcoin or ether, among others — is recorded in an online ledger.

Different cryptocurrencies are native to the blockchain they were built upon. The price of any given “token” can be impacted by a variety of factors — though value is generally based on the perceived worth assigned to it by those willing to invest.

Perhaps the most well known cryptocurrency is bitcoin, the price of which can be swayed by supply and demand, investor sentiment, and other factors. This can create extreme volatility. For example, the value of one bitcoin ($BTC) was equivalent to about $17,000 at the time of this writing. But one year ago, one $BTC was valued at approximately $64,000. Investors can purchase fractions of bitcoin, called “satoshis,” a reference to the token’s elusive creator, Satoshi Nakamoto.

Unlike with securities such as stocks, bonds, and other investments that hold value tied to traditional fiat money, cryptocurrencies are not regulated by the U.S. Securities and Exchange Commission, though that could be changing. Gary Gensler, the SEC chair, said last month he would work with Congress to ensure the crypto industry gets more regulatory oversight.

Cryptocurrencies are bought and traded on exchanges — like Binance, Coinbase, and Crypto.com — and stored in digital wallets.

One of those exchanges, FTX, filed for bankruptcy protection last week after a period of turmoil. FTX was seeking funding after it said it received an influx of withdrawal requests it could not fulfill. Briefly, it appeared that peer exchange Binance would take over the company in a rescue offer. But that was rescinded after Binance CEO Changpeng Zhao reviewed FTX’s finances, which revealed an $8 billion shortfall.

It was then that FTX, based in the Bahamas, filed for Chapter 11 bankruptcy in Delaware, and founder Sam Bankman-Fried stepped down as CEO.

While overseeing the exchange, Bankman-Fried — often referred to by his initials SBF and once lauded as a crypto hero — built a fortune that reached $26 billion last year and, before FTX’s bankruptcy filing, still sat around $16 billion, Bloomberg reported.

His net worth was wiped out after FTX’s collapse.

The money generated from an exchange’s users, mainly through fees, is used in many ways, sometimes for sponsorships and other branded investments. Some exchanges may also have their own tokens as a way for supporters to invest in the platform they believe in. Binance, the largest crypto exchange by volume, has Binance Coin (BNB), Crypto.com has Cronos token (CRO), and before FTX’s collapse, the exchange’s FTT token had jumped on news of a Visa partnership.

In September 2021, the Philadelphia 76ers signed a six-year deal with Crypto.com, worth about $10 million annually. The partnership made Crypto.com the team’s jersey patch sponsor, and also included an exclusive series of NFTs.

At the time, Chris Heck, the team’s former president of business operations, told The Inquirer, “These digital currencies, they really do have no boundaries.”

In 2021, Crypto.com had an estimated $400 million in sports deals. That figure doesn’t include the reported $700 million, 20-year deal Crypto.com penned to for naming rights to the arena formerly known as the Staples Center, home to the Los Angeles Lakers and Clippers.

In the days since FTX filed for bankruptcy protections, Crypto.com CEO Kris Marszalek has said his company won’t meet the same fate, according to Coindesk.

Crypto.com and FTX previously had about $1 billion in business between them, but the company had at some point reduced its exposure to FTX down to about $10 million, Marszalek said during a live interview streamed to Crypto.com’s YouTube channel.

Aside from revenue streams like ticket sales, professional sports leagues earn a lot of money through advertising partners.

Partnership fees reached almost $2 billion for the 2021-22 NFL season, for example — more than any other league — mainly driven by sports betting and tech companies, CNBC reported, citing an analysis from sports consultancy firm IEG.

Crypto brands spent about $130 million on NBA sponsorships in 2021-22, CNN reported, citing a separate IEG analysis.

Nielsen estimated sports deals involving crypto, blockchain, or NFTs were up more than 1,000% in 2021 compared with 2019. Car sponsorships, by comparison, were only up 81% over that same time.

In addition to Crypto.com’s naming-rights deal for the Los Angeles arena, FTX last year bought the rights to the Miami arena that’s home to the Heat. FTX paid $135 million for a 19-year deal, which is now in question.

Nielsen estimates sports fans are about 22% more interested in investing in cryptocurrencies than the average American. The firm notes that exposure due to increased ads and sponsorships can be valuable as brands — including crypto exchanges — seek to grow their customer base. Nielsen found in a March report that the sponsorships “drove an average 10% lift in purchase intent among the exposed fan base.”