By now, almost everyone has heard of Bitcoin (BTC +3.52%) and Ethereum (ETH +3.10%), but unless you are deep in the weeds in the world of crypto, or perhaps a fan of some of Europe's top soccer leagues, you may not have heard of Chiliz (CHZ +3.89%). But with that token's price up by 27% over the past week at a time when most other cryptocurrencies have been struggling, perhaps it should be on your radar.
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What is Chiliz, anyway?
Chiliz is a cryptocurrency that "aims to foster a blockchain ecosystem built for sports and entertainment." Most notably, it is the crypto that powers the Socios fan token platform. Fan tokens are essentially cryptocurrencies issued by sports teams (or bands, entertainers, and the like) that offer their holders perks and benefits similar to membership in an exclusive fan club. Holders are able to vote on decisions relating to their team, such as the designs of special uniforms, banners, or murals that will be displayed at the stadium or in the locker room. They also can get chances to win more perks like access to VIP events or to meet players. The Socios platform has partnerships with more than 100 teams and individuals worldwide, including some NBA and NFL teams, Formula 1 drivers, UFC fighters, and some of Europe's top soccer teams such as FC Barcelona, Real Madrid, Paris Saint Germain, and Manchester City.
Thanks in large part to the momentum from these partnerships, Chiliz has grown into the 34th-largest cryptocurrency by market cap with a value of about $1.6 billion. Chiliz was previously an Ethereum ERC-20 token, but it has since moved to its own blockchain. While Chiliz is down about 70% from the all-time high it touched in March 2021, it has rallied by 190% since its cycle low in May 2022 on the back of these announcements and partnerships for Socios.
CRYPTO: CHZ
Key Data Points
Barcelona stake is a big deal
Most interesting of all of the developments surrounding Chiliz was news that it had acquired almost 25% of Barca Studios for about $100 million. Barca Studios is the media arm of FC Barcelona, one of Spain's most popular and successful soccer teams. The iconic players who have suited up for Barcelona over the years and the club's sustained success have made it popular far beyond Spain. On Facebook, FC Barcelona has the second-most fans of any team in the world, trailing only arch-rival Real Madrid. After falling on hard times financially, the legendary club was in dire need of funds this summer to acquire new players, so it sold portions of its media and merchandising rights. The club also took out a loan of more than $600 million from Goldman Sachs (GS +0.78%) and inked a new shirt sponsorship deal with Spotify (SPOT 1.42%).
Chiliz took advantage of the club's need for funds, and while it is unclear how it will monetize its stake in Barca Studios, it now owns a piece of a very attractive asset. Socios says it will work with Barcelona to develop non-fungible tokens and metaverse projects.
Picks and shovels
Fan tokens offer some intriguing perks for supporters of the teams that issue them. But from a purely financial perspective, the investment value they provide is relatively minimal. For that reason, I'm more interested in Chiliz as the engine that powers the fan token universe, especially as fan tokens become more widespread. Instead of betting on the Barcelona fan token, investors can buy Chiliz as a picks and shovels play on the fan token industry. (During the gold rush, the business owners who sold picks, shovels, and other gear to the miners often ended up more prosperous than the miners themselves, which is one way to look at an asset like Chiliz.)
As the engine that powers the fan token market, and one that now owns a large stake in an incredibly intriguing real-world asset in Barca Studios, Chiliz looks like an interesting investment. Buying cryptocurrencies that are further down the line in terms of market cap can be risky, but Chiliz is making real inroads in the world of sports and entertainment, and its stake in Barca Studios offers tangible value. So I view this token as unique among cryptos and worthy of a small position for risk-tolerant investors. Despite the run Chiliz has staged this summer, at a recent price of about $0.26 it still is far below its all-time high of $0.89. It reached that level long before it acquired its stake in Barca Studios or forged many of its current partnerships, meaning a return to its previous high or beyond is not out of the question if the overall crypto market picks up momentum.
