As far as I know, InvestorPlace Assistant News Writer Brenden Rearick’s job is to write about news related to stocks and cryptocurrencies our readers are interested in. So, his recent piece about the Crypto.com Coin (CCC:CRO-USD) and its parent, Crypto.com, getting the naming rights to the Staples Center in Los Angeles on Christmas Day, was an appropriate way to run out the 2021 business news cycle.
And while the naming rights are indicative of how far crypto’s come in 2021, in and of itself, it is not a reason to buy CRO-USD.
Here’s why.
Crypto.com Coin Naming Rights Paid for Itself
Bloomberg reported on Nov. 22 that the $35 million per year Crypto.com would pay over 20 years ($700 million in total) had already paid for itself, more than a month in advance of the crypto exchange taking ownership of the signage at the former Staples Center.
As a result of the news, which officially was announced by Anschutz Entertainment Group, the owners of the arena, the Cryto.com Coin gained 55% in value, rising to a market capitalization of $18 billion, making it the 13th-biggest cryptocurrency.
“‘The resulting PR doubled its token price and led to a US$9 billion run-up in market cap,’ Meltem Demirors, chief strategy officer at CoinShares International Ltd., said on Twitter (NYSE:TWTR). ‘The deal paid for itself ~13x over, difficult to untangle token distribution and who benefited, but smart token marketing strategy!’” Bloomberg reported.
As I write this, the Crypto.com Coin is trading at $0.5193, down from a Nov. 24 high of $0.9678. That’s a 46% decline in a month. As a result, its market cap is considerably lower at $13.1 billion and ranked in 16th spot, down three places from late November.
I think it’s fair to say that any of the gains from the November announcement have disappeared heading into 2022. So investors interested in profiting from CRO-USD appreciation are wise to find other reasons to buy the Cryto.com Coin.
Doling out $700 million for naming rights isn’t one of them. No matter how sexy it might be.
How to Buy Into Crypto.com
My first commentary about CRO-USD was in early December. I suggested an investment in Crypto.com, the business, was a better investment than its cryptocurrency.
That said, the Crypto.com Coin did meet my utility sniff test.
“While I continue to have an issue with people using crypto to pay for things when greenbacks work just fine – not to mention CRO-USD has appreciated by 1,062% year-to-date, making a T-shirt purchase with the Crypto.com coin a very expensive mistake – the idea of a native coin for the Crypto.com trading platform and Crypto.com blockchain makes complete sense,” I wrote on Dec. 3.
I honestly haven’t seen enough to buy CRO-USD. Instead, I continue to be fixated on the business. After all, Coinbase Global (NASDAQ:COIN) made $406 million in the third quarter on $1.24 billion in net revenue. That’s a 33% net margin.
Over the past four quarters, Coinbase has generated almost $3 billion in net income on $5.36 billion for a 55% net margin. While its profits and revenues might be volatile due to the ups and downs of cryptocurrency prices, there’s no doubt they’re attractive to investors.
Crypto.com’s also doing well from a financial perspective.
“[T]he five-year-old privately held company has 3,000 employees around the world and generated hundreds of millions of dollars in revenue in the second quarter of this year, according to [CEO Kris] Marszalek,” Financial Times reported on Nov. 19.
“‘In the second quarter, we did about a quarter of Coinbase’s revenues and we have been profitable from the start of the year,’ the Crypto.com boss told the Financial Times. ‘The crypto space is extremely hot and we’ve seen a 20-times revenue growth this year.’”
As investments go, Coinbase is still the gold standard for investing in cryptocurrency exchanges. It’s also one of the few publicly traded.
So, my recommendation, if you share my opinion that Crypto.com would be an attractive investment, is to buy COIN stock until you have other potential options.
The Bottom Line
Although I remain on the sidelines for cryptocurrencies, I find their development very interesting to watch.
As for Crypto.com’s $700 million naming rights deal in Los Angeles, it will bring the Singapore-based crypto exchange some recognition in the U.S. So, from a business perspective, I understand why it did the deal. As for the Crypto.com Coin, I don’t see how its future price potential has anything to do with the name on the Los Angeles Lakers’ arena.
It’s simply not a reason to buy CRO-USD.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
