Fan tokens are occupying the forefront of the cryptoverse as football fervor intensifies in anticipation of significant tournaments in Euro 2024 and Copa Americas
These tokens, which national teams or individual organizations issue, are not your typical digital assets. They offer supporters a tradeable method of engaging with their teams.
In anticipation of the Euro 2024 European soccer championship, which commences on Friday, and the Copa América in North and South America, which starts a week later, there has been an increase in activity in tokens associated with the participating national teams.
Data from CoinGecko indicates that the Chiliz cryptocurrency, the native coin of the Socios blockchain, which hosts the majority of significant fan tokens and serves as a broad proxy for the niche sector, has increased in value from approximately $687 million at the beginning of the year to over $1.07 billion. This value is approaching the levels last observed during the 2022 World Cup.
In recent months, the trading volumes of fan tokens have also increased, with over $170 million recorded on May 24, compared to a range of $25 million to $57 million for the majority of January, according to data from Kaiko.
CoinGecko data indicates that the aggregate market value of listed fan tokens is approximately $413 million.
The still-nascent sector of fan tokens, which typically offer benefits such as early ticket access, raffle entries, merchandise discounts, or the opportunity to vote on minor decisions such as match songs, could be put to a critical test during this summer of sport.
Supporters praise the tokens as an uncommon example of real-world crypto utility. At the same time, critics emphasize the contradiction between the stated purpose of team engagement and the speculative and risky nature of tradeable assets.
A Chiliz spokesperson stated that the company’s marketing explicitly asserted that “fan tokens are fan-engagement tools and should be used as such.”.
In the past 30 days, the price of Portugal’s fan token has increased by approximately 2% to $2.94, while Argentina’s token momentarily reached its highest level since 2022 at $2.46. Nevertheless, both tokens are still trading below their peaks, achieved around the 2022 World Cup.
“The trading volumes have experienced a significant increase; however, we anticipate that it will be temporary,” stated Jag Kooner, Bitfinex’s director of derivatives, alluding to a subsequent decline in trading volumes after the World Cup.
During a previous crypto boom in 2021, numerous top soccer teams and sports personalities promoted crypto assets, including non-fungible tokens (NFTs) and fan tokens, to their supporters.
This action drew the ire of critics, who cautioned that it could encourage financial speculation.
Last year, British legislators warned that the proliferation of NFTs in sports was endangering supporters’ financial well-being and potentially harming clubs’ reputations.
In the interim, England and Wales’s football supporters’ association has criticized fan token partnerships as “attempting to monetize trivial matters” or “introducing financial barriers into genuine supporter engagement.”
SPECULATION VS ENGAGEMENT
Adam McCarthy, a research analyst at Kaiko, observed that token volume and price changes do not always correspond with team performance.
“I don’t see evidence that holders benefit from holding these tokens as a sort of bet on the respective team’s success,” he said.
A study examining supporter token trading in the context of major sporting events discovered that it frequently corresponds with the “buy the rumor, sell the news” pattern prevalent in conventional finance.
Volumes and returns generally increase in anticipation of significant tournaments but decline at the commencement of substantial matches.
However, another study, which opens a new browser, discovered that fans who purchase tokens typically capitalize on the advantages of voting on club-related decisions.
Lennart Ante, CEO of the Blockchain Research Lab and co-author of both studies, stated, “Fans are more engaged when they have the opportunity to influence club decisions.”
“The dual nature of fan tokens as both engagement tools and speculative assets creates a dichotomy,” according to Ante. “The future of fan tokens could hinge on how this distribution between engagement-focused users and speculators evolves.”
SLOW GROWTH, EVEN AS TOKENS EXPAND
The expansion of tokens associated with club teams, as opposed to national teams, continues to be gradual.
Simultaneously, fan tokens have surged in recent years due to the simplicity of launching tokens on blockchains such as Solana, according to Kooner of Bitfinex. In the previous year, Chiliz announced the release of 80 supporter tokens.
Earlier this year, Paris Saint-Germain, the French football giant, declared its intention to become a network validator for the Chiliz Chain blockchain.
This would entail the management and security of a portion of the chain. The initiative includes a fan token.
Fans and investors were recently granted a 10% stake in Watford FC through digital equity tokens.
In addition to the equity stake, the level of investment may include private training ground tours and banquets with team members.