Chiliz’s CHZ Holders Love the Nasty Elbows – And the 20-Fold Price Gains in 2021

Friday night’s mixed martial arts bout between British featherweight fighter Brendan Loughnane and Brazil’s Sheymon Moraes could make history – and not because of the expert footwork or the nasty elbows. 

It’s because the entire MMA fight was made possible through the wizardry of fast-emerging blockchain technology and one particular platform in particular: Socios, a unit of the company Chiliz, where sports fans can use the increasingly popular genre of cryptocurrencies known as “fan tokens” to express their devotion. 

Some lucky crypto traders have made a fortune betting on Chiliz’s in-house token, CHZ, which has surged 20-fold this year in digital-asset markets, to a previously unthinkable $2.3 billion market capitalization. That compares with a 70% year-to-date gain for bitcoin (BTC), the largest cryptocurrency, and a tripling in the price of No. 2 ether (ETH), the native token of the Ethereum blockchain.

In the case of Friday night’s Professional Fighters League (PFL) fight, the matchup was chosen by fans who purchased PFL-related tokens via Socios; they voted on whom they wanted to see square off in the EPSN+ event. The PFL fan tokens sold out in under 10 minutes for $500,000 during the initial launch.

“This is what really got me excited,” Katie Talati, head of research for the cryptocurrency-focused asset-management firm Arca Funds, told CoinDesk in an interview, adding:

“I know we work in this space all day. But at the end of the day, we’re really a tiny subset of the overall population. And I think if we want to bring the benefits of tokenization and digital assets in the blockchain to the wider community, we need to offer more of this kind of consumer-facing applications that interact with our everyday lives.” 

When it comes to cryptocurrencies, of course, there’s no way to avoid the notorious price volatility. On Friday, the CHZ tokens appeared to get swept up in a broad sell-off across cryptocurrency markets. As of press time, the Chiliz coin price was down 21% over the past 24 hours, according to CoinGecko. 

Whether the tokens are a good investment might come down to just how fast the platform grows. 

Malta-based Chiliz burned about $800,000 worth of Chiliz tokens Thursday after an impressive first-quarter earnings report, thanks to its business model of combining sports and crypto, two communities with some of the most committed adherents anywhere. The token burn means there’s now less supply in circulation, and so theoretically the remaining tokens should be worth more. 

The Chiliz token’s price increase year-to-date makes it one of the top performers among all cryptocurrencies with at least $1 billion market capitalization, according to Messari data, in a league with the astonishing performance of the meme token dogecoin (DOGE) and the decentralized exchange PancakeSwap’s CAKE token.

Sports and crypto have already proved to be a powerful combination, with NBA Top Shot and its FLOW tokens recently becoming one of the hottest platforms for recently buzzy non-fungible tokens, or NFTs, in the form of digital trading cards linked to fans’ favorite NBA players’ video highlights.

There are two major platforms under the company Chiliz: the Chiliz exchange, which facilitates trading fan tokens, and the Socios.com sports fan engagement platform, where sports fans can interact with their favorite sports team through fan tokens – both run on the Proof-of-Authority Chiliz blockchain.

“Since last year, the digital-assets market has really started to recognize different sectors and different themes, and have used those kinds of themes for investments,”  Talati said. “Chiliz is just a very standalone project. There’s nothing else that’s in the sports realm that’s trying to use tokenization to incentivize fans in that same way.”

Chiliz raised $65 million in 2018 through a private token sale to investors including Binance, OK Blockchain Capital and FBG Capital. Earlier this year, it received an equity investment from Chicago-based trading firm Jump Trading. The company also recently launched a partnership with the European affiliate of Japanese e-commerce giant Rakuten, allowing Rakuten’s users in Europe to redeem their Rakuten points for fan tokens.

When crypto meets sports

Some 25 fan tokens are now offered on Socios after the company secured a series of partnerships with sport teams and leagues including FC Barcelona, Manchester City, Juventus and the Ultimate Fighting Championship (UFC).

“Large organizations like football clubs and the UFC need control of their brands and monetization rights,” Mason Nystrom, an analyst at Messari, wrote in a research analysis last September on Chiliz. “Tokenized loyalty points and rewards present new opportunities for increasing revenue beyond ticket sales. The push to grow digital lines of revenue will surely grow even once the pandemic subsides.”

At the time of writing, the most-traded fan tokens on Chiliz exchange are FC Barcelona Fan Token and Paris Saint-Germain Fan Token, according to CoinMarketCap.

As CoinDesk reported, the initial fan token sale of FC Barcelona ($BAR) last June hit well above $1.3 million with more than 600,000 tokens sold.

The Chiliz project’s governance, according to Talati, also has made the token appealing for sports fans to hold long-term.

“As a woman, I love Beyonce, you know,” Talati said. “I can totally see Beyonce token one day” given the high fan engagement empowered by the underlying blockchain technology of Chiliz. (In other words, catering to music listeners instead of sports nuts.)  

Rising speculative interest in East Asia in Chiliz coin

Excluding the activity on the Chiliz exchange, trading volume in the CHZ token is most active on global crypto exchange giant Binance, Korea-based Upbit and OKEx, according to CoinGecko data, reflecting significant interest from retail speculators in East Asia.

Based on growing interest in cryptocurrency as a whole, as well as the long-standing passion toward professional soccer leagues, Chiliz’s success in the East Asian countries was inevitable, Jason Kim, chief investment officer of the Tokyo-headquartered investment firm Anchor Value, told CoinDesk. 

Bitcoin has become too expensive for newly entered crypto investors in South Korea, and the relatively cheap and available Chiliz, especially with its sports theme, makes it a popular crypto investment there, Kim said.

Of course, CHZ tokens are not nearly as cheap as they were a few months ago.