It’s been a heavy year for crypto investors. We’ve spent the year talking about bear markets, inflation, interest rates, stock market correlation, dollar cost averaging and so much more.
These are all important topics. They’re hardly fun or exciting, though. And investing in crypto should be fun and exciting. It’s a thrilling space. There’s so much to explore. And there are so many opportunities — even in a bear market.
That’s why I’m so excited about recommending Chiliz (CHZ) this month. It’s an incredibly speculative play. But it’s a potentially lucrative investment that has risen about 153% over the last three months.
Bitcoin, by comparison, is up just 3% in the last 90 days.
Chiliz is more than a project that’s outperforming the market, though. It’s a grand experiment on how sports teams connect with their fans. And that’s where the fun — and intrigue — begins.
Sports Fans Are Different
The Green Bay Packers are unique in the sports landscape. It’s a publicly owned nonprofit organization (insert your Super Bowl joke here). And fans own shares of the team. In fact, the Packers are the only fan-owned team in the four major North American sports leagues (NFL, MLB, NBA and NHL).
Last November, the Packers sold shares to the public for the sixth time in the team’s history. More than 175,000 NEW shareholders bought stock for $300 per share. The stock offering, which closed in February, raised close to $66 million. And it attracted “investors” from across the country. People living in Wisconsin bought only 17% of the shares!
Functionally, the shares are pretty worthless. ESPN does a nice job of explaining why:
Before the most recent sale, there were 5,009,479 shares of stock held by 361,362 stockholders, none of whom receive any dividends — meaning it’s essentially a worthless piece of paper. The team’s bylaws state that “to protect against someone taking control of the team, the articles of incorporation prohibit any person from owning more than 200,000 shares.”
The shares are not traded on any market either. But the fact that people are choosing to become owners knowing that it won’t benefit them financially illustrates the depth of the connection between the fans and their team.
The Next Generation of Fandom
Chiliz is attempting to tap into the passion fans have for their teams. It has created a blockchain ecosystem for sports teams that’s equal parts loyalty/rewards program and fan engagement. In Europe and Asia, fans buy CHZ. And they use CHZ to buy fan tokens issued by individual teams. The tokens allow them to vote in polls, influence decisions (like what color uniform players should wear) and claim cool rewards and experiences. In the U.S., fans earn loyalty points by engaging with teams on a mobile app. These points can then be redeemed for rewards. (Not using crypto for fan engagement in the U.S. helps Chiliz avoid regulatory issues.)
In addition to being used for buying fan tokens, CHZ is also traded openly on crypto exchanges.
Fan votes, influencing decisions and rewards programs are just the beginning in terms of how a blockchain platform can deepen the relationship between fans and teams. NFTs, fractionalized ticket sales and metaverse or immersive experiences are the next frontier in the fan experience. And because blockchain technology is so powerful, it can incorporate all sorts of advancements that we’re not even thinking about today.
Meaningful Traction
Chiliz has caught on with some of the most iconic soccer teams in the world. Paris Saint-Germain, Juventus, AS Roma, FC Barcelona, AC Milan, Manchester City and Arsenal all use Chiliz through Socios.com (the company that commercializes the Chiliz technology and platform). In total, more than 50 soccer teams outside of the U.S. use the Chiliz platform.
Even though it’s not using the crypto component in the U.S., Chiliz has gained traction here through Socios.com as well. Major League Soccer uses it. So do 14 NFL teams, 27 NBA teams and 14 NHL teams.
To be clear, investing in Chiliz means investing in the CHZ token. In the last 24 hours, CHZ trading volume has ranged between $270 million and $370 million.
Potential Catalyst
This is a relatively new market, so we’re still learning about its market dynamics. But the upcoming World Cup could provide a short term boost. CHZ is very soccer forward. And the World Cup, which begins on November 20, is the world’s biggest soccer event.
Regardless of whether the World Cup provides a temporary boost, CHZ has been remarkably resilient. The last three months have shown it can perform in a bear market. And it’s shown a remarkable ability to attract new teams to its platform. If the Chiliz platform continues to grow and provide value to both teams and fans, CHZ will reap the benefits. And that’s why we’re adding CHZ to the Crypto Asset Strategies speculative portfolio this week. This is a huge experiment. And if it works, it’s going to be BIG.
Full disclosure: I’ve done business in the past with Chiliz founder and CEO Alexandre Dreyfus. I watched him launch Chilipoker (which became Chiligaming) and turn it into a remarkably successful business. Chiligaming’s business-to-business assets were acquired in 2012 by Bally Technologies (now Scientific Games). I do not have any financial interest in Chiliz or Socios.com. I haven’t talked to Alex since 2012. I had no idea Alex had launched Chiliz until I started researching CHZ. That said, I like Alex. He’s as sharp as they come. And he’s a good person. In my book, that means quite a bit.
Rules of the Road
Investing in a bear market is tricky. It is likely that the market will go down further from here. But it’s important to be opportunistic. So if you have capital to invest — and you’re psychologically and emotionally willing to enter what promises to be a highly volatile market — here are some guidelines to follow.
- Do not invest money you can’t afford to lose. The markets are in for a rough ride. If you can’t afford to lose the money, don’t risk it.
- Focus on projects with strong use cases.
- Look for teams or communities that are active and committed to their projects.
- Always enter a position using dollar cost averaging. That means buying a small amount each week rather than buying your entire position at once. That way, if prices continue to fall, you lower your overall acquisition cost.
- Don’t try to time the market perfectly. Nobody can. And I believe this bear market will be around for several months. So if you want to wait, that’s perfectly okay. But when you do invest, make sure you utilize dollar cost averaging to buy into the market.
- Diversify your crypto portfolio. From a percentage standpoint, bitcoin and ethereum should be the biggest investments in your crypto portfolio. But you need exposure to a much broader and more diverse set of coins to take advantage of the full upside of the crypto markets. Bear markets are a good time to diversify your portfolio and increase exposure to different crypto sectors.
Remember, investing in crypto is risky. Investing in a crypto bear market carries even more risk. Less than 5% of your overall portfolio should be invested in crypto. That said, I believe CHZ provides an attractive risk-reward ratio.