Recent data have shown that sports clubs’ tokens, from Paris Saint-Germain to Manchester City, have failed investors that had a long term outlook and held the assets for a long period.
HODL, as an acronym for “hold on for dear life,” has become a mantra among crypto enthusiasts denoting a long-term approach to cryptocurrency. This approach would be used by fans expecting a huge payout in the long term.
However, soccer club tokens have disappointed many eager fans, with prices fast losing pace within days. Fan tokens have been trading on major crypto exchanges for three years, promising a new way for clubs to raise funds and for fans to become closer to their favourite teams.
What you should know
- A cursory look at the performances of Paris Saint-Germain and Manchester City fan tokens shows that investors that held tokens for a year would experience a loss of at least 30%.
- At the time of writing this article, the Manchester City fan token was trading at $15.00, down 37.08% from investors that brought the token a year ago.
- Paris Saint-Germain had a similar drop after a jump, due to soccer star Lionel Messi’s transfer to the club. At the time of writing, the Paris Saint-Germain fan token was trading at $15.06, down 31.13% for investors that brought the token a year ago.
- Clubs that have issued tokens include the likes of Manchester City, SS Lazio, FC Porto, Santos FC, FC Barcelona, AC Milan and Trabzonspor. Some, like FC Arsenal, have raised as much as $5.5 million in first-day sales of fan tokens, dubbed “initial fan token offerings,” though most have raised closer to $2 million in these sales. That’s a fraction of these clubs’ expenses.
- Clubs can potentially generate additional revenue from future token sales and from the fees they charge for volumes traded on Binance.
Some investors made a profit from fan tokens
According to Bloomberg, Miguel Schweizer, the chief executive officer of Decrypto, bought the French club’s fan token, $PSG, on the notion that prices would rise due to reports of Messi’s admission into the club. They did, but he didn’t keep the tokens for very long.
He sold them a few days later, betting on a short-term rally. His prediction was correct; within a week, prices were down 34%, and after four months, they were down 73% from when the tokens were created.
“I would never keep them in my investment portfolio for the long term,” said Schweizer, 29, chief executive officer of Decrypto, a Buenos-Aires based exchange and wallet. “They’re trade opportunities.”
Why fan tokens have failed investors
- According to Oliver Bell, CEO and co-founder of XCAD Network, a company that makes tokens for content creators, “The problem with current fan tokens is the clubs do not actively promote them or the utility the tokens have”
- He added that “The people that are buying them are not necessarily fans of the clubs at all; the only buyers are crypto enthusiasts.”
- Analysts also warn that fan token demand might swiftly shift from excitement to apathy. The biggest critique they level is that the fans receive few real rewards hence may not be worth it.
- The Juventus token, for example, enabled supporters to utilize loyalty points earned as token holders to purchase VIP tickets, while the PSG token allowed holders to vote on the design of the new team bus and club motto.
- In the meantime, the market is still struggling with its small size. According to CoinMarketCap and Coingecko data, the top ten fan tokens have an average daily volume of $13 million, which is only 28% of the daily volume traded on average for the 364 coins listed on Binance. The sports fan tokens have a market value of $491 million and a daily traded volume of $241 million
- The world’s largest fan token by market capitalization, Manchester City, has a market value of $56 million and the daily traded volume is under $15 million, according to data from CoinMarketCap.com.