This article was developed in collaboration with Orr Group, which provides the nonprofit sector with full-service philanthropic support and management services.
Financial market downturns can be a major source of concern for nonprofits, especially those that rely on annual giving drives to cover their operating costs. In recent years, thousands of nonprofit organizations have turned to Crypto Philanthropy to diversify their revenue streams and recession-proof their fundraising strategies. But most have never tried asking for crypto donations during a market correction. Below are insights and tips to help you maximize crypto donor engagement in a crypto bear market.
Volatility is Normal in Crypto Market Cycles
How can Bitcoin’s price fall nearly 70% from its all-time high, and still have so many fans? It’s not blind faith—this optimism is based on historical market cycles. In fact, knowledgeable crypto investors actually can benefit greatly from the dramatic price fluctuations in the market.
Market corrections, which typically follow a major “bull run,” or period of sustained growth, enable crypto users to reinvest in their favorite crypto assets at a lower price, which could later appreciate in value. Consider the case of Bitcoin, which is famously volatile but ultimately became the best-performing asset of the past decade.
Bear Market or Not, Crypto Donors Still Support Important Causes
On the whole, donors tend to be more conservative with their donations during economic downturns. In the wake of the 2008 financial crisis, charitable giving dropped by 7% in 2008 and by another 6% in 2009, according to a report from the Stanford Center on Poverty and Inequality.
Does this behavioral trend also apply to crypto donors? So far, we’ve still witnessed acts of generosity from the crypto community in the midst of the bear market.
Here are a few cause examples that crypto donors have supported this year:
1. Ukraine Humanitarian Relief
Some news outlets have called the conflict in Ukraine the “world’s first crypto war,” a clear nod to the overwhelming charitable support received by Ukraine from the crypto community.
Donors have given crypto worth at least $100 million directly to the Ukrainian government and to other fundraisers that support nonprofits making an impact on the ground. When the world rallied to support humanitarian aid efforts in Ukraine, the crypto community led the way—regardless of the “bear market” that was emerging at the same time.
2. LGBTQIA+ Rights
During June’s Pride Month, nonprofits supporting LGBTQIA+ rights received sizable crypto donations from individuals as well as from other sources, such as NFT projects.
On the first day of Pride Month, The Giving Block’s LGBTQIA+ Impact Index Fund received a 49.9 ETH donation (worth ~96,900 at time of receipt). Other notable acts of crypto generosity during Pride Month include World of Women NFT’s pledge of $120,000 to OutRight Action International, a nonprofit committed to to protecting and advancing the human rights of lesbian, gay, bisexual, transgender, intersex and queer (LGBTIQ) people around the world.
3. Abortion Rights
The crypto community has visibly stepped up to support reproductive justice after news broke about the U.S. Supreme Court’s landmark Dobbs v. Jackson decision.
The Center for Reproductive Rights received an 86.4 ETH donation (worth ~$169,000 at time of donation) from an NFT project affiliated with art/activist collective Pussy Riot. Notably, a crop of new social impact DAOs (Decentralized Autonomous Organizations) have emerged, like ChoiceDAO and CowgirlDAO, that are leading the web3 community’s efforts to fund nonprofits working to protect the rights of women.
What’s the reason for the continued giving during a market downturn? Keep in mind that even during a bear market, many people who have been active crypto investors for at least one full market cycle are often “up,” meaning they have a positive overall return on investment.
How to Ask for Crypto Donations in a Crypto Bear Market
Crypto users prefer to communicate on social media platforms like Twitter, Reddit and Discord. As your nonprofit establishes its fundraising strategy during a bear market, keep these ideas in mind:
1. Emphasize Your Mission’s Urgency
If your organization’s fundraising appeal hinges on a time-sensitive issue, be sure to emphasize it in your crypto campaign messaging. As crypto donors have demonstrated, bear markets aren’t necessarily a challenge when it comes to supporting urgent causes like Ukrainian humanitarian relief efforts.
Consider the following questions as you draft your communications:
- What’s urgently at stake right now?
- How can the community support your cause today?
- Has your organization shifted its operating costs to a particular area of your work?
2. Build a Digital Community of Supporters
Wondering how to establish a supportive community of crypto donors? Start by making your nonprofit the go-to resource on your organization’s key issue(s) or cause area(s).
Once you find groups to connect with (try browsing hashtags like #DonateCrypto and #CryptoPhilanthropy), here are a few ways to begin creating interest in your mission:
- Host Twitter Spaces geared toward potential crypto donors
- Official accounts are great, but encourage your staff to use their own accounts too
- Become an active participant in the Crypto Philanthropy conversation
3. Reframe Your Fundraising Appeal to Crypto Donors
On average, crypto donors have been found to be more generous than their cash-giving peers. So when market conditions are bullish, nonprofits may feel more empowered to ask for large donations.
During a bear market, try these ways of positioning your crypto fundraising pitch instead:
- Present impact data in cryptocurrency terms (e.g., 5 Bitcoin funds a new animal shelter)
- Encourage crypto donors to “give what you can” rather than targeting large gifts
- If you’re in touch with NFT creators about potential support, ask them to donate a portion of sale proceeds, rather than a specific amount
4. Show That You Understand the Crypto Investor’s Mindset
Most crypto donors know that making a crypto donation can be much more tax-efficient than donating cash. That’s because the IRS classifies crypto as a property for tax purposes. The result is that donors can offset their capital gains by donating a portion of their crypto to registered charities.
Using your organization’s newfound market savvy, you’ll want to strategically communicate different benefits to your potential supporters, depending on their priorities. During a bear market, considering diversifying your message to reflect your awareness of the fact that:
- Some donors will want to buy more crypto at low prices
- Some donors will want to hold and wait things out, and
- Some donors will want to sell now (and will incur capital gains)
5. Consider HODLing Your Crypto Donations
Many fundraisers debate whether or not to immediately sell crypto donations for cash. Is there a right choice? The short answer is that it depends on your organization’s priorities. If your nonprofit has a time-sensitive mission, selling for cash that you can use for your operations may be the best move for you.
However, if crypto is a long-term revenue stream for your organization, announcing that you are hodling some or all crypto donations can signal to your potential crypto donors that:
- You have a basic grasp of crypto market dynamics
- You’re hodling with the hope of increasing the value of a donation
- You’re potentially increasing the value of crypto donations received during a bear market
No matter which bear market fundraising strategies you choose, keep in mind that it may take some time and effort before your nonprofit sees major charitable support. But this is work that pays off. Many nonprofits that receive big crypto donations during high-growth market conditions spent hours community-building during quieter periods like these.
Bottom Line: Crypto Bear Markets Are Optimal for Donor Stewardship
Crypto bear markets are widely considered the best opportunity for companies and investors to build and acquire assets at a low price. This “bear market is prime-time” principle also applies to nonprofits ready to begin accepting crypto or take their crypto fundraising strategy to new heights.
Crypto fundraising is an excellent opportunity to connect with a young, affluent and passionate donor demographic, to diversify revenue streams, and future-proof your organization. Putting in the work now will help your nonprofit maximize its fundraising outcomes when the next crypto bull market comes around.
Ready to learn more about crypto fundraising with The Giving Block? Request a demo from an expert to see how crypto donations can increase your nonprofit’s fundraising results.
Still learning the difference between crypto bear and bull markets, or how they impact charitable giving? Check out our explainer article.
Note: The Giving Block is not a financial or tax advisor, and cannot give investment or tax advice. Regulations in this industry are also rapidly changing. You should consult a qualified, licensed advisor before deciding to engage in any transaction. This article is not tax or financial tax or financial advice, but rather is a summary of practices observed in this rapidly developing industry.