2023 Fan Token Overview
Present and future of fan tokens
TL;DR
Fan tokens are tokens issued by sports teams or artists for their fans. Token holders receive a variety of benefits, including the right to participate in key team decisions and access to exclusive content or events, while the issuer can generate new revenue streams.
The price of fan tokens has become increasingly speculative, divorcing it from its original purpose: to build a closer relationship between fans and sports teams or artists. When the value of a token is solely focused on price appreciation, the authentic engagement and experience of fans can be compromised.
The future of fan tokens depends not only on expanding their services but also on overcoming a number of challenges, including regulatory responses and aggressive speculation. If fan tokens can overcome these issues, they could play an important role in popularizing the Web3 market.
Fan tokens, from soccer to ice hockey
Fan tokens are virtual assets that represent any entity with fans, from various sports teams to artists. Fan tokens primarily serve to strengthen the connection between fans and the organizations they support. Fan tokens are primarily issued for sports teams ranging from soccer to ice hockey, with a market forming around European soccer clubs.
Fan token holders receive several benefits. These include, but are not limited to:
Voting rights on key team and artist decisions
Access to exclusive content and events
Rewards for token activity
Meanwhile, the management team and participating artists can generate additional revenue through the issuance of tokens and create new channels of communication by forming deeper and closer relationships with fans.
The advent and popularization of fan tokens
Fan tokens began to emerge prominently in 2018 in association with major sports clubs, especially European soccer clubs. On September 24, 2018, Juventus announced plans to launch the "Official Juventus Fan Token" in a strategic partnership with Socios.com.
As global interest in cryptocurrency and blockchain technology grew significantly in 2020 and 2021, fan tokens also rode the wave and grew in popularity. In 2021, a number of sports teams, leagues, and artists joined the fan token market. The FIFA World Cup in 2022 helped boost the market’s popularity even further. At that time, seven sports fan tokens (ACM, AFC, ATM, BAR, CITY, INTER, and NAP) were listed on the Korean cryptocurrency exchange Upbit, demonstrating their popularity. Along with the popularity of the World Cup, several national teams (Brazil, Argentina, Spain, etc.) introduced fan tokens, and the trading volume of fan tokens increased significantly. However, when the performance of some national teams during the World Cup was not as expected, the price of fan tokens of those countries experienced great volatility.
In fact, in the run-up to the 2022 World Cup, the Spanish soccer team's fan token SNFT, which was a favorite to win the tournament, saw a sharp increase in price. However, shortly after the World Cup, the price tanked. On December 6, after Spain’s defeat to Morocco, SNFT plummeted to a record low of $0.033. The Brazilian fan token also experienced a price drop in a similar fashion.
The idea behind fan tokens is to create a closer relationship between fans and sports teams and artists and to allow fans to participate in key decisions of the group they support. However, price fluctuations like the one above indicate that there is a stronger speculative element at play, as price volatility moves separately from the fundamentals, just like themed stocks.
Are fan token holders really fans?
As mentioned above, fan tokens can give fans a variety of rights while also providing a new revenue stream for sports teams or artists. However, if the actual value of these tokens and the rights that come with them are unclear or unfulfilled, that trust can quickly crumble. In particular, many fan tokens issued during the recent World Cup promised rights such as exclusive footage and voting, but in many cases failed to deliver on their promises.
If that were the case, fans should have been unhappy, but that wasn't the case. The vast majority of fan token holders were holding the tokens for investment purposes rather than as actual fans and therefore did not react strongly to the non-fulfillment of the token's benefits. This suggests that fan tokens have lost their intrinsic value as a tool to strengthen the bond between fans and teams or artists, and are instead being utilized for speculative purposes.
How are fan tokens doing?
According to Coinmarketcap, the current total market cap for the fan tokens is $230m, which is lower than the market cap of the top 100 single tokens. The 7-day trading volume is roughly at around $32m. Compared to the 7-day trading volume of the emerging RWA category ($288m), there is about a 9x difference.
Furthermore, even when compared to the average of the top three tokens in each category, the fan token market is currently a small market. With the absence of any major sports events such as the World Cup, it is not expected that the market will expand in the short term as categories such as RWA are attracting more attention.
Forecast
Currently, UK lawmakers are calling for regulation of soccer fan token trading, and this is a trend that is likely to spread to other countries as well. However, fan tokens are still being issued, and many platforms are working to address the issues that have arisen and create practical solutions.
Platforms like Socios.com have recognized this problem and are taking concrete steps to address it. For example, they are emphasizing the deeper connection between fans and teams or artists by making sure that benefits such as VIP spaces and direct access to athletes are properly addressed. They are also actively pursuing collaborations with multiple partners to expand their services.
However, the future of fan tokens is not just about scaling services. There are many challenges ahead, including responding to regulations, improving technology, and overcoming their speculative nature. Addressing these challenges will require close collaboration and communication between multiple stakeholders such as regulators, companies, and fans. If fan tokens can overcome these challenges and focus on providing an authentic fan experience, they could play an important role in the cryptocurrency market and become a key factor in the mass adoption of cryptocurrencies.
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