As football fever builds for major tournaments in Europe and the Americas, a small yet buzzy part of the cryptoverse is stealing centre stage: fan tokens.

These are not your average digital assets, they're tokens issued by national sides or individual clubs that promise supporters a tradeable way to engage with their teams.

Activity in tokens linked to participating national teams has increased ahead of the Euro 2024 European soccer championship, which kicks off on Friday, and the Copa América in North and South America that starts a week later.

The market value of the Chiliz cryptocurrency - the native coin of the Socios blockchain which hosts most major fan tokens, and thus a broad proxy for the niche sector - has climbed to more than $1.07 billion from about $687 million at the start of the year and is nearing levels last seen around the 2022 World Cup, according to data from CoinGecko.

Trading volumes of fan tokens have also picked up in recent months, registering more than $170 million on May 24, versus between $25 million and $57 million for most of January, according to data from Kaiko. The total market value of listed fan tokens stands around $413 million, CoinGecko data shows.

This summer of sport could be a key test for the still-nascent sector of fan tokens, which typically offer perks like raffle entries, early ticket access, merchandise discounts, or chances to vote on minor decisions such as match songs

Backers laud the tokens as a rare example of real-world crypto utility, while critics highlight the tensions between the stated purpose of team engagement and the speculative - and risky - nature of tradeable assets.

A spokesperson for Chiliz said the company's marketing was clear that "fan tokens are fan-engagement tools and should be used as such."

The price of Portugal's fan token has edged up about 2% in the past 30 days to $2.94, while Argentina's token briefly touched its highest level since 2022 at $2.46 - though both are still trading below their peaks hit around the 2022 World Cup.

"There has been a major uptick in trading volumes but we expect it to be short-lived," said Jag Kooner, head of derivatives at Bitfinex, pointing to a drop-off in trading following the World Cup.

Many top soccer teams and sports stars promoted crypto assets - such as non-fungible tokens (NFTs) or fan tokens - to supporters during a previous crypto boom in 2021, drawing the ire of critics who warnedthey might encourage financial speculation.

British lawmakers warned last year that the rise of NFTs in sport was putting supporters at risk of financial harm and potentially damaging the reputations of clubs. Meanwhile, the football supporters' association of England and Wales has dismissed fan token partnerships as "trying to monetize trivial matters" or "inserting financial barriers into genuine supporter engagement".

Engagement vs speculation

Changes in token volume and price don't always correspond with team performance, noted Adam McCarthy, research analyst at Kaiko.

"I don't see evidence that holders benefit from holding these tokens as a sort of bet on the respective teams success," he added.

A study analyzing fan token trading around major sporting events found that it often aligns with a "buy the rumor, sell the news" pattern that is found in traditional finance. Volumes and returns typically increase ahead of major tournaments, then fall at the onset of important matches.

On the other hand, another study found fans who buy tokens typically take advantage of the benefits offered via voting on club-related decisions.

"When fans are given a chance to influence club decisions, they engage substantively," said Lennart Ante, who worked on both studies and is CEO of the Blockchain Research Lab.

"The dual nature of fan tokens as both engagement tools and speculative assets creates a dichotomy," Ante added. "The future of fan tokens could hinge on how this distribution between engagement-focused users and speculators evolves."

Slow growth even as tokens pop up

The growth of tokens linked to club sides, rather than national teams, remains slow.

At the same time, the number of fan tokens has increased in recent years, given the ease of launching tokens on blockchains like Solana, Bitfinex's Kooner said. Chiliz said they had launched 80 fan tokens in the past year.

French football giant Paris Saint-Germain, which has a fan token, announced earlier this year it would become a network validator for the Chiliz Chain blockchain, meaning it would manage and secure part of the chain.

English team Watford FC recently offered a 10% stake in the club to investors and fans via digital equity tokens. Beyond the equity stake, other perks include dinners with team members and private training ground tours, depending on the level of investment.