As the excitement builds for the upcoming 2024 European Football Championship and Copa America, an intriguing facet of the cryptocurrency world is drawing significant attention: fan tokens. These unique digital assets, issued by national teams or individual clubs, offer fans a tradeable means to engage more deeply with their favorite teams.
The buzz around fan tokens has intensified with the approach of these major football tournaments. Tokens linked to participating national teams have seen a surge in activity, reflecting the growing interest among supporters. The Chiliz cryptocurrency, the native coin of the Socios blockchain which hosts many prominent fan tokens, has seen its market value climb to over US$1.07 billion from about US$687 million at the start of the year. This marks a resurgence to levels observed around the 2022 World Cup, according to CoinGecko data.
Trading volumes for fan tokens have also experienced a notable uptick in recent months. On May 24, trading volumes exceeded US$170 million, compared to between US$25 million and US$57 million for most of January, according to data from Kaiko. The total market value of listed fan tokens now stands at approximately US$413 million, as per CoinGecko.
This summer’s football spectacles could serve as a crucial test for the burgeoning fan token sector. Typically, these tokens offer perks such as early ticket access or the ability to vote on match songs. Proponents praise fan tokens as a tangible example of real-world cryptocurrency utility, while critics caution against the speculative and risky nature of these tradeable assets.
A spokesperson for Chiliz emphasized that the company clearly markets fan tokens as tools for fan engagement. “Fan tokens are fan-engagement tools and should be used as such,” they stated.
Despite the overall enthusiasm, the performance of individual fan tokens has been mixed. Portugal’s fan token has risen about 2 percent in the past 30 days to US$2.94, and Argentina’s token briefly hit its highest level since 2022 at US$2.46. However, both are still trading below the peaks reached during the 2022 World Cup.
“There has been a major uptick in trading volumes, but we expect it to be short-lived,” said Mr. Jag Kooner, head of derivatives at Bitfinex, suggesting that trading activity might decline after the tournaments.
The promotion of crypto assets by top football teams and sports stars during the 2021 crypto boom drew criticism from those who warned it could encourage financial speculation. British lawmakers cautioned in 2023 that the rise of non-fungible tokens (NFTs) in sport was putting supporters at risk of financial harm and potentially tarnishing the reputations of clubs.
The Football Supporters’ Association of England and Wales has criticized fan token partnerships, describing them as efforts to monetize trivial matters or create financial barriers to genuine supporter engagement.
According to Mr. Adam McCarthy, a research analyst at Kaiko, changes in token volume and price do not always correlate with team performance. His research indicates that fan token trading often follows a “buy the rumour, sell the news” pattern found in traditional finance, where volumes and returns typically rise before major tournaments and fall once significant matches begin.
Conversely, another study found that fans who purchase tokens generally appreciate the benefits of voting on club-related decisions. “When fans are given a chance to influence club decisions, they engage substantively,” said Mr. Lennart Ante, CEO of the Blockchain Research Lab, who conducted the study.
“The dual nature of fan tokens as both engagement tools and speculative assets creates a dichotomy,” he added. “The future of fan tokens could hinge on how this distribution between engagement-focused users and speculators evolves.”
As football fervor intensifies, the evolving landscape of fan tokens will undoubtedly be a space to watch, balancing the line between genuine fan engagement and financial speculation.
