As football fever rises for the tournaments in Europe and America, an even smaller part of the crypto world is taking center stage: fan tokens. These are not ordinary digital assets, but tokens issued by national teams, clubs or individual players that offer fans a tradable way to identify with their teams and/or players.
In the run-up to the European Championship and the Copa América (North and South America), fan token activity had increased sharply. The market value of the cryptocurrency Chiliz – the native coin of the Socios blockchain that hosts most fan tokens – has risen from around USD 680 million at the beginning of the year to more than USD 1.07 billion, approaching levels last seen around the 2022 FIFA World Cup. Fan token trading volume has increased in recent months, reaching more than USD 170 million in May 2024, while in January 2024 it was mostly between USD 25 – 57 million.
Proponents praise fan tokens as a unique example of real-world crypto utility, while critics highlight tensions between the stated purpose of club engagement and the speculative and risky nature of tradable assets. In 2021, some top soccer teams promoted crypto-to-assets to fans, drawing the ire of critics who warned that they can encourage financial speculation. British lawmakers warned last year that the rise of NFTs in sports puts fans at risk of financial harm and potentially damaging clubs’ reputations.
Commitment versus speculation
Changes in token volumes and token prices do not always correspond with the performance of a club or player. A study analyzing fan token trading around major sporting events found that it often follows the “buy the rumor, sell the news” pattern also found in traditional finance. Volumes and returns typically rise before major tournaments and then fall at the start of important matches.
On the other hand, another study found that fans who buy tokens usually take advantage of the benefits that come from voting on club-related decisions. When fans have the opportunity to influence a club’s decisions, they become highly engaged. The versatility of fan tokens as an engagement tool and speculative asset offers interesting opportunities but also certain dangers for all involved.
Limited growth
The global growth of fan tokens compared to other crypto assets remains slow. At the same time, the number of fan tokens has increased in recent years because it is so easy to launch tokens on blockchains. French football giant Paris Saint-Germain, which has 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 investors and fans a 10% stake in the club via digital equity tokens. In addition to the equity stake, there are other perks such as dinners with team members and private tours of the training ground depending on the amount of the investment.
