Fan Tokens Rally as Investors Bet on Soccer Fever

• Fan tokens linked to soccer teams are seeing increased trading activity ahead of Euro 2024 and Copa América.
• The Chiliz cryptocurrency market value has risen to over $1.07 billion, nearing levels last seen during the 2022 World Cup.
• Despite the uptick in fan token activity, the sector faces scrutiny over balancing team engagement and financial speculation.

As excitement builds for the upcoming Euro 2024 and Copa América tournaments, fan tokens are becoming a focal point in the cryptoverse as reported by Reuters, a crypto news source. These digital assets, issued by national teams and clubs, offer supporters a tradeable way to engage with their favorite teams. Recent data reveals a significant increase in activity around these tokens, reflecting growing interest ahead of these major soccer events.

Chiliz, the native cryptocurrency of the Socios blockchain that hosts many fan tokens, has seen its market value climb from $687 million at the start of the year to over $1.07 billion. This surge brings it close to levels last observed during the 2022 World Cup, according to CoinGecko. Additionally, fan token trading volumes have also increased, reaching over $170 million in May compared to the $25 million to $57 million range seen in January, as per Kaiko data. The total market value of listed fan tokens now hovers around the $413 million mark.

This summer could be crucial for the fan token sector, which remains relatively new. These tokens typically offer perks like raffle entries, early ticket access, merchandise discounts, and opportunities to vote on minor team decisions such as match songs. While supporters appreciate these tokens as a rare instance of real-world crypto utility, critics argue that the speculative nature of these tradable assets could overshadow their intended purpose of fan engagement.

A spokesperson for Chiliz emphasized that the company’s marketing clearly states that “fan tokens are fan-engagement tools and should be used as such.” For instance, the price of Portugal’s fan token has edged up about 2% in the past 30 days to $2.94, while Argentina’s token briefly reached its highest level since 2022 at $2.46, although both remain below their 2022 World Cup peaks. Jag Kooner, head of derivatives at Bitfinex, noted that the recent increase in trading volumes might be temporary, pointing to a decline in activity following the World Cup.

During the previous crypto boom in 2021, numerous top soccer teams and sports stars promoted crypto assets like non-fungible tokens (NFTs) and fan tokens, which led to criticism. British lawmakers cautioned last year that the rise of NFTs in sports could pose financial risks to supporters and potentially harm club reputations. Similarly, the Football Supporters’ Association of England and Wales criticized fan token partnerships as attempts to monetize trivial matters or impose financial barriers on genuine supporter engagement.

Adam McCarthy, a research analyst at Kaiko, observed that changes in token volume and price do not always correspond with team performance. He stated that there is no clear evidence that holders benefit from holding these tokens as a form of investment on the respective team’s success. A study analyzing fan token trading around major sporting events found that it often follows a “buy the rumor, sell the news” pattern, with volumes and returns typically increasing ahead of major tournaments and then falling as important matches begin.

However, another study found that fans who buy tokens usually take advantage of the benefits offered via voting on club-related decisions. Lennart Ante, CEO of the Blockchain Research Lab, noted that when fans can influence club decisions, they engage more actively. He highlighted the dual nature of fan tokens as both engagement tools and speculative assets, suggesting that the future of fan tokens could depend on how the distribution between engagement-focused users and speculators evolves.

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