The world of sports is evolving with the introduction of digital assets, and this time it’s not your average cryptocurrency. National sides and individual clubs are now offering fans something extra special: tokens that provide a tradeable way to engage with their favorite teams.
With the upcoming Euro 2024 European soccer championship and the Copa América in the Americas, there has been a surge in activity for tokens linked to participating nations. The market value of Chiliz, the native coin of the Socios blockchain that hosts most fan tokens, has seen a remarkable climb to over $1.07 billion, indicating a growing interest in this niche sector.
Fan token trading volumes have also picked up, with a notable spike on May 24, and the total market value of listed fan tokens now stands at around $413 million. This summer of sports will be a crucial test for the young sector, as these tokens offer fans perks like raffle entries, early ticket access, and merchandise discounts, as well as a voice in minor team decisions.
The concept has its supporters and critics. Backers praise the tokens as a unique example of crypto’s real-world utility, while critics point out the tension between team engagement and the speculative nature of tradeable assets. Chiliz has been clear in its marketing, emphasizing that fan tokens are primarily engagement tools.
Portugal and Argentina’s fan tokens have seen a slight uptick in price ahead of the tournaments, but it remains to be seen if this trend will continue post-World Cup. The head of derivatives at Bitfinex, Jag Kooner, notes that there was a drop-off in trading after the previous World Cup, indicating that the current surge may be short-lived.
Despite this, many top soccer teams and sports stars promoted crypto assets like NFTs and fan tokens to their supporters during the 2021 crypto boom, drawing criticism from those concerned about the potential for financial speculation. British lawmakers and football supporters’ associations have expressed similar worries, cautioning that these tokens could harm fans financially and damage the reputations of the clubs.
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The Dual Nature of Fan Tokens
Adam McCarthy, a research analyst at Kaiko, points out that changes in token volume and price don’t always align with team performance. The “buy the rumor, sell the news” pattern seen in traditional finance is also present in fan token trading, with volumes and returns increasing ahead of major tournaments and then falling during crucial matches.
However, a study by Lennart Ante, CEO of the Blockchain Research Lab, found that fans who purchase these tokens tend to take advantage of the voting benefits they offer. This dual nature of fan tokens as both engagement tools and speculative assets creates a dichotomy, and the future of their success may depend on how this distribution between engagement-focused users and speculators evolves.
The Slow but Steady Growth of Club-Side Tokens
While the growth of club-side tokens has been slower, the number of fan tokens has increased in recent years due to the ease of launching them on blockchains like Solana. Chiliz alone has launched 80 fan tokens in the past year, and French football giant Paris Saint-Germain has even become a network validator for the Chiliz Chain blockchain. Watford FC, an English team, took things a step further by offering a 10% stake in the club via digital equity tokens, along with exclusive perks for investors.
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