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Football Tokens Shine Ahead of Sports Summer — TradingView News
As soccer fever grows for major tournaments in Europe and the Americas, a small but vibrant part of the cryptoverse is stealing center stage: fan tokens.
These are not your usual digital assets, they are tokens issued by national teams or individual clubs that promise fans a marketable way to interact with their teams.
Activity in tokens linked to participating national teams has increased ahead of the Euro 2024 European soccer championship, which begins on Friday, and the Copa América in North and South America, which begins a week later.
The market value of the Chiliz cryptocurrency – the native coin of the Socios blockchain that hosts most of the major fan tokens, and therefore a broad proxy for the niche sector – has risen to over $1.07 billion from around $687 million of dollars at the beginning of the year. it is approaching levels last seen around the 2022 World Cup, according to data from CoinGecko.
Fan token trading volumes have also increased in recent months, recording more than $170 million on May 24, versus between $25 million and $57 million for most of January, according to Kaiko data. According to data from CoinGecko, the total market value of listed fan tokens amounts to approximately $413 million.
This summer of sports could be a key test for the still-nascent industry of fan tokens, which typically offer perks like lottery entries, early access to tickets, discounts on merchandise or the ability to vote on smaller decisions like game songs.
Supporters praise the tokens as a rare example of real-world crypto utility, while critics highlight tensions between the stated purpose of the team’s effort and the speculative — and risky — nature of tradable assets.
A spokesperson for Chiliz said the company’s marketing was clear that “fan tokens are fan engagement tools and should be used as such.”
The price of Portugal’s fan token has risen about 2% over the past 30 days to $2.94, while Argentina’s token briefly touched its highest level since 2022 at $2.46, although both are still trading below the peaks reached during the 2022 World Cup.
“There has been a noticeable increase in trading volumes, but we expect it to be short-lived,” said Jag Kooner, head of derivatives at Bitfinex, pointing to a decline in trading after the World Cup.
Many top soccer teams and sports stars promoted crypto assets — such as non-fungible tokens (NFTs) or fan tokens — to fans during an earlier cryptocurrency boom in 2021, drawing the ire of critics who warned they could encourage financial speculation.
British lawmakers warned last year that the rise of NFTs in sport was putting fans at risk of financial harm and potentially damaging clubs’ reputations. Meanwhile, the Football Supporters’ Association of England and Wales has dismissed fan token partnerships as “an attempt to monetise trivial matters” or “the insertion of financial barriers to real fan engagement”.
COMMITMENT VS SPECULATION
Changes in token volume and price do not always correspond to team performance, noted Adam McCarthy, research analyst at Kaiko.
“I see no evidence that holders benefit from holding these tokens as some sort of bet on the success of their respective teams,” he added.
A study analyzing fan token trading at major sporting events found that it often aligns with the “buy the rumor, sell the news” model found in traditional finance. Volumes and returns typically increase before major tournaments, then decline at the start of major games.
On the other hand, another study found that fans who purchase tokens typically take advantage of the benefits of voting on club-related decisions.
“When fans are given the chance to influence club decisions, they engage in a substantial way,” said Lennart Ante, who worked on both studies and is CEO of the Blockchain Research Lab.
“The dual nature of fan tokens as both engagement tools and speculative assets creates a dichotomy,” Ante added. “The future of fan tokens may depend on how this distribution evolves between engagement-focused users and speculators.”
SLOW GROWTH EVEN WHEN THE TOKENS ARRIVE
The growth of tokens linked to clubs, rather than national teams, remains slow.
At the same time, the number of fan tokens has increased in recent years, given the ease of launching tokens on blockchains like Solana, Bitfinex’s Kooner said. Chiliz said it has launched 80 fan tokens in the past year.
French football giant Paris Saint-Germain, which owns a fan token, announced earlier this year that it would become a network validator for the Chiliz Chain blockchain, meaning it would manage and secure part of the chain .
English club Watford FC recently offered a 10% stake in the club to investors and fans via digital stock tokens. In addition to equity participation, other perks include dinners with team members and private tours of the training grounds, depending on the level of investment.