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Fan Tokens Surge Ahead of Euro 2024 and Copa América: A Crypto Game Changer or Speculative Play?

Lukas Schmidt
04:11am, Tuesday, Jun 11, 2024
Fan Tokens Surge Ahead of Euro 2024 and Copa América: A Crypto Game Changer or Speculative Play?

With football fever igniting excitement across Europe and the Americas, a unique segment of the cryptoverse is scoring big—fan tokens. These digital assets, issued by national teams or individual clubs, provide supporters a tradeable way to connect with their beloved teams, making them far from ordinary crypto investments.

As we edge closer to the Euro 2024 championship and Copa América, activity in these tokens is heating up. The Chiliz cryptocurrency, the primary coin for the Socios blockchain, which hosts most fan tokens, has seen its market value surge to over $1.07 billion from about $687 million earlier this year. This marks its peak levels reminiscent of the 2022 World Cup, according to CoinGecko.

Trading volumes have also increased, with fan tokens recording over $170 million in trades on May 24, a significant rise from the $25 million to $57 million range seen in January, as per Kaiko data. CoinGecko reports that the combined market value of listed fan tokens hovers around $413 million.

This prospective "summer of sport" could be a pivotal test for the still-nascent fan token sector. These tokens typically offer perks like raffle entries, early ticket access, merchandise discounts, and even votes on minor team decisions. Proponents advertise them as one of the few real-world utilities for crypto, while critics argue that the risky and speculative nature of tradeable assets dilutes their purpose.

A spokesperson for Chiliz emphasized, "Fan tokens are strictly engagement tools and should be used accordingly." Despite these assertions, trading in Portugal's fan token has risen about 2% in the past month to $2.94, and Argentina's token briefly marked its highest level since 2022 at $2.46—though both remain below their World Cup peaks.

"Trading volumes have surged recently, but it's likely to be short-lived," remarked Jag Kooner, Bitfinex's head of derivatives, pointing to the post-World Cup decline.

Some soccer teams and sports icons previously promoted crypto assets like non-fungible tokens (NFTs) and fan tokens during the 2021 crypto boom, inviting criticism for potentially encouraging financial speculation. British lawmakers even cautioned that the rise of NFTs in sport could expose supporters to financial risks and tarnish club reputations. The football supporters' associations in England and Wales have also criticized fan token partnerships for "monetizing trivial matters" and creating financial barriers to genuine fan engagement.

Volume and price fluctuations in fan tokens don’t always match team performance, noted Adam McCarthy, a research analyst at Kaiko. "There's no clear evidence that owners of these tokens benefit as if they're betting on their teams' success," he added. Studies indicate that fan token trading around major events often follows a "buy the rumor, sell the news" trend seen in traditional finance. Volume and returns generally spike before major tournaments, only to drop once key matches begin.

Conversely, another study revealed that fans who purchase tokens typically use the benefits of voting on club decisions. "When fans can influence club-related decisions, they genuinely engage," observed Lennart Ante, CEO of the Blockchain Research Lab, who conducted the studies. "The dual identity of fan tokens as both engagement platforms and speculative assets creates a dichotomy. The future of fan tokens may depend on balancing engagement-centric users and speculators."

Growth in tokens linked to club sides remains sluggish, even as new tokens continue to emerge, thanks to the ease of launching them on platforms like Solana, noted Bitfinex’s Kooner. Meanwhile, Chiliz reported launching 80 fan tokens in the past year. Paris Saint-Germain, which has its own fan token, announced it would become a network validator for the Chiliz Chain blockchain, thereby managing and securing part of the chain. On the other hand, Watford FC recently offered a 10% stake in the club through digital equity tokens, providing perks like dinners with team members and private tours, depending on the investment level.

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Lukas Schmidt

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