Nov 29 (Reuters) – The fun token market, a volatile cocktail of digital currencies and sports, is heating up in the Qatari desert.
Interest in this particular type of digital currency, which is usually associated with sports teams such as Barcelona or Brazil, has increased during the soccer World Cup, which began on November 20.
Average daily trading volume for the tokens rose from $32 million the previous month to around $300 million in November, according to Paris-based crypto data firm Cayco.
“So we have a 10x increase in volume, which is huge for these tokens,” said research analyst Dessislava Aubert.
For some buyers, these tokens offer an opportunity to interact with their party and earn perks such as a chance to win prizes and vote for songs played in contests. For others, tradable coins provide a new investment opportunity.
However, it is the brave investor who wants to discover any reasonable correlation between erratic coin prices and real-world events.
The token of Lionel Messi’s Argentina team fell 25% to $5.26 after the team’s shock defeat to Saudi Arabia in the opening game of the World Cup. However, since the team’s next victory against Mexico, which brought relief to fans, it has dropped 22 percent.
Cristiano Ronaldo’s Portugal coin surged 119 percent to $7 in the 10 days leading up to the tournament, but has since lost almost half its value, even as it remains unbeaten and tops its group against Uruguay on Monday. Win to reach the elimination stage.
Similarly in club football, Arsenal’s mark is down 12.5% since the start of the season to $1.68, despite their brilliant rise to the top of the English Premier League.
Broader weakness in the crypto market is partly to blame for the decline, according to researchers who say high-priced assets are languishing as investors shy away from risk.
According to data from CoinGecko, the total market value of fancoins rose to $401 million during the opening weekend of the World Cup, up from $256 million about 10 days earlier, but has since fallen below $300 million.
Siddharth Jaiswal, founder and CEO of Sportzchain, which mainly issues tokens for the Asian market, said that people should not buy these coins mainly to make money.
“The icing on the cake is that it’s a tool that’s on the blockchain and can be easily traded in the future, so there’s a financial implication attached to it,” he added.
“But the first impression should never be that you’re buying the fan icon from a profit standpoint.”
Socios, promoted by Messi, is the biggest player in this sector of the crypto industry. The business facilitates most fancoins and describes the purchase of such tokens as joining a loyalty scheme with exclusive benefits and rewards.
Some of the world’s biggest soccer clubs have launched tokens backed by Socios, including Paris Saint-Germain, Manchester City, Inter Milan and Atlético Madrid, as well as the national teams of Portugal and Argentina, with token market values ranging from around $7 million to $21. Million.
Socios-linked Chilliz token trading volume, which users buy to trade their team’s tokens, hit a seven-month high in early November ahead of the World Cup, but has since retreated 40% from that peak.
When looking at the breakdown of Chilliz token trades by fiat currency, the Korean won surpassed 87 percent of its total fiat volume in early November, followed by the Turkish lira, according to Kaikou data.
The growth spurt in fan tokens comes at a time of turmoil in the crypto market, which is reeling after the collapse of the main exchange FTX earlier this month. Bitcoin is trading near a two-year low of around $16,245.
While the FTX debacle has raised serious questions about the lack of regulation in digital assets, fancoins — which some issuers say fall under the category of utility tokens — remain a gray area.
“Tokens that don’t provide enough utility may face regulatory scrutiny because it suggests the token is an investment in the club,” said Marcus Sotirio, an analyst at digital asset broker GlobalBlock.
“However, if the token provides exclusive benefits and focuses on the utility it provides to its fans, I don’t think there will be regulatory issues.”
Socios said it believes in regulations for fan trust and transparency.
In August, Britain’s advertising watchdog upheld a ruling against Arsenal over two ads about fan tokens published on the club’s website and Facebook that it deemed misleading and irresponsible, although the club denied this.
Marcus Thielen, head of research at digital asset platform Matrixport, said interest in the tokens among soccer fans may be short-lived.
Companies and teams selling these tokens must now provide more value at regular intervals, otherwise users will lose interest very quickly after the World Cup.
Reporting by Madha Singh and Lisa Mattakal in Bengaluru. Edited by Parvin Char
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