Watford’s recent announcement of their 2021/22 home kit coincided with the revealing of their new shirt sponsor. Resting across much of the front of the kit is a logo reading “Stake.com,” a Curacao-based online cryptocurrency casino. The crypto casino and Watford have struck a multi-year partnership agreement which has the potential to explode into the Club’s most valuable sponsorship deal. This transaction, however, is unlike most other sponsorship agreements to date. In partnering with a crypto casino, Watford themselves might have wagered a huge bet, one which could (if placed) pay immense dividends.
DISCLAIMER: this article is not intending to give financial advice. The purpose of writing this is to analyze both sides to a gamble Watford might be taking. If you are thinking of putting money into cryptocurrency, do lots of research on your own and weigh up your options before making a responsible decision. Do not let this article be the reason you choose/lean one way or the other.
The Chips Potentially on the Table
According to Adam Leventhal of The Athletic, the initial payment Stake.com has given Watford is around £5 million with performance bonuses. The report further said if Watford avoid relegation this season, then Stake.com will be paying Watford in excess of £6 million, thus beating the previous club-record sponsorship deal which Sportsbet.io had with the Hornets for both the 2019/20 and 2020/21 campaign.
The official Watford website says the agreement was “paid for in cryptocurrency.” That is where there is uncertainty, as it remains to be seen whether Watford immediately transferred the money into fiat money or kept it in the form of cryptocurrency. Both scenarios are analyzed in this article. If kept in cryptocurrency, the figure could potentially crash to zero, though it could also tremendously multiply. As in, simply explained, the £5 million worth of cryptocurrency Watford were paid, if they did not transfer the money into pound sterling, is unlikely to stay at a value of exactly £5 million.
The exact cryptocurrency the Club accepted is unclear, though considering the Club website highlighted how Stake.com accounted for “over five per cent of Bitcoin transactions worldwide” and Bitcoin’s popularity, it would not be a shock if Bitcoin was the cryptocurrency of choice (or a mix of Bitcoin and other large players in the cryptocurrency world for portfolio diversity purposes).
Watford Have Encountered Cryptocurrency Before
Before diving further into the forecast for Watford’s potential cryptocurrency investment/gamble/risk, it is important to note the Hornets have previously tapped into the world of cryptocurrency. In the 2019/20 campaign, the Hornets’ sleeve sponsor was indeed Bitcoin. The Club have also accepted Bitcoin as a way to purchase hospitality boxes and exclusive merchandise, as well as offered billboard-shoutout opportunities activated by cryptocurrency (as per Oliver Knight). Watford even previously launched a Bitcoin education website.
So, for the past few years, the Club has kept a close eye on the decentralized finance market. But, if the Club is to keep the money in the form of cryptocurrency and make the wager, is that a wise choice? Should they keep the money in crypto form?
Watford’s Possibly Exciting Cryptocurrency Earnings Forecast
Simply put, if the money is kept in the form of cryptocurrency, the £5 million could theoretically be worth nothing in the future. While that scenario is virtually impossible, what is important to mention is that this theoretical gamble, like all bets, could end up costing Watford heavily (for the Club, millions of pounds). This is also the case when someone invests in stocks or puts money partially out of their control.
The hierarchy at Watford, of course, are not blindly putting their sponsorship money in the cryptocurrency market and just hoping for the best if that is the path they have chosen. Lots of analysis and research would have been done in deciding to accept the sponsorship money in the form of cryptocurrency and not transferring it to fiat money immediately.
The Club are taking a long-term view of the cryptocurrency market if they make the decision to hold the cryptocurrency. In a three-month span this year, the price of one Bitcoin crashed from over £45,000 to just over £20,000. If Watford are taking a short-term look at the cryptocurrency market (as other cryptocurrencies followed similar behavior as Bitcoin), all they will see is risky volatility. What will happen to the value of cryptocurrencies on a day-to-day basis is anyone’s guess.
If Watford are looking to make quick returns on a cryptocurrency investment, then that would be poor, risky money management. If Watford are only aiming to cash out in the distant future, then such a gamble is more reasonable to make.
On January 1st, 2010, one Bitcoin was worth seven pennies. Two years later, £3.83. Two years later, £559.64. Two years later, £315.59. Two years later, in 2018, £9,742.46. The following year, £2,810.69. On January 1st, 2020, one Bitcoin was worth £5,221.52. At the time of writing, the value of one Bitcoin is £23,523.19 (note: exchange rates are using present exchange rates from Bitcoin to US dollar, then US dollar to British pounds. Source of Bitcoin prices mentioned before is linked here). Even with the value of Bitcoin (and many other major cryptocurrencies as they tend to follow similar trends to Bitcoin) being extremely volatile, in the long run, the one clear direction it has gone in is up.
Such trends are expected to continue in the long run. Short-term volatility is impossible to predict, so Watford would be foolish to take such a near-sighted approach. The long-run value of Bitcoin is expected to increase by many experts. A recent article by Forbes maintains a super-bullish view on Bitcoin. While mentioning many sources who are extremely optimistic about the future of cryptocurrency, they also cited analyst Vetle Lunde of Arcane Crypto Research who predicts, like many other experts, that the price of one Bitcoin will exceed $300,000 (£218,000) by the end of 2025. If that 2025 price prediction comes true (this is a hypothetical scenario, not at all a fact/guarantee), the £5 million will be worth, if all in Bitcoin, nearly £50 million. Whether this scenario unfolds as predicted (or anywhere near the prediction) remains to be seen and is impossible to precisely forecast. Bitcoinprice.com also shows lots of positive price predictions by experts in the field.
Still, there are no guarantees in the cryptocurrency world. The experts can be wrong as they have sometimes been in the past. If the value of cryptocurrencies were guaranteed to go up, everyone (and every team) would have their money in it. So yes, there is a chance the £5 million, even in the long term, loses value. But, if the Club has elected to keep the money in the form of cryptocurrency, it is not impossible to understand why. There is considerable risk involved, though any bet made would have been carefully calculated. Nonetheless, this is a path the Club should continue to actively reconsider if they have already started walking down it.
Why the Potential Gamble Is Probably Not Worth It
Even if in the long run, the prices of cryptocurrencies go up, Watford cannot become a crypto hedge fund with a football team as a money-making side business. Especially considering the massive financial losses from the COVID year, having money now is better than gambling money in an infant market for later. £5 million up-front is a sum hard to turn away from.
What the COVID campaign for football also showed is that there is no way to predict when a financially-harmful event will suddenly occur. If Watford were to keep the money in Bitcoin and a COVID-esque event abruptly happened again and money needed to be withdrawn, even in the long run, there is a solid chance the value of Bitcoin in the given moment will be less than what it presently is. There is no way to predict the market cycles for the times fiat money will spontaneously be needed.
The bottom line is players need to be paid in real money. The Club needs real money. The future of cryptocurrencies is exciting and could maybe lead to lots of regret for those who did not hop on the train. Regardless, the Club, especially for now, need to be in a place where they know their funds and can rely on an exact monetary value at any given time. Who knows when the Club will need this £5 million? Who knows what the future of cryptocurrency truly holds? What we do know is necessary, now more than ever, is that financial certainty is pivotal to operating a football club.
If the hierarchy feels super confident in keeping the money in the form of cryptocurrency, then there is tremendous risk involved. But, as has been proven since 2012, Gino Pozzo and Co. are experts at managing the Club’s money, so fans can rest assured that they will choose the path which is the safest, and thus the best, for Watford Football Club.