The cryptocurrency market is known for its extreme volatility, with even the most established coins experiencing periods of decline.
However, some cryptocurrencies, known as blue-chip cryptocurrencies, are considered more reliable than others.
This is because some non-blue chip cryptocurrencies use the bear market as an opportunity to rug pull or exit scam, blaming it on low liquidity in the market.
Investors want to invest in a long-term cryptocurrency. But how do investors identify blue-chip cryptocurrencies?
This article explains
- blue-chip cryptocurrencies
- things investors should look for before investing in them
- if they are suitable for you as an investor.
What Are Blue Chip Cryptocurrencies and NFT?
The term “blue chip” is used in the corporate world to refer to financially stable companies with fundamental profitability mechanisms, even in challenging economic circumstances.
Therefore, blue chip cryptocurrencies are digital currencies with the following characteristics in the crypto world.
- Years of Existence and Long-Standing Operation
- Founder’s Reputation
- Institutional Status
- Large Market Cap
- Higher Liquidity
- Highly Interchangeable
- Level of Decentralization
- Many Use Cases/ Long-Term Potential
- Relatively Stable
Let’s get into the details.
Years of Existence and Long-Standing Operation
This key factor contributes to a cryptocurrency being considered a blue chip.
This means that the cryptocurrency has been around for a significant amount of time and has a proven stability and reliability track record.
The founder’s reputation is another crucial factor when evaluating whether a crypto is a blue chip investment.
Crypto participants believe that a founder with a strong reputation is likelier to have created a well-designed crypto with a clear purpose.
On the other hand, it is generally believed that a founder with a poor reputation may abandon the project or engage in unethical behaviour.
Take, for example, the recently launched Worldcoin (WLD). Although it has not yet become a “blue chip coin,” it has gained tremendous popularity and fans even before its release in July 2023.
This is because it was created by Sam Altman, also known as the creator of OpenAI’s ChatGPT.
Institutional status refers to the level of support and adoption by large financial institutions, such as hedge funds, investment banks, and VCs.
Blue chip cryptocurrencies are those that have a high degree of institutional status. This means these institutions see them as a safe and reliable investment.
When large institutions buy and sell a cryptocurrency, it creates more demand for the asset, which can help stabilize its price.
Additionally, institutional investors often have deep pockets, which can help absorb sell-offs and prevent the price of a cryptocurrency from crashing.
Large Market Cap
A large market cap indicates that a cryptocurrency is widely adopted and has a large user base.
This gives it a strong foundation and makes it less susceptible to wild price fluctuations. For instance, Bitcoin (BTC) and Ethereum (ETH) have a market cap of $500 billion and $195 billion, respectively, as of when this article was published.
Liquidity is the degree to which an asset can be bought or sold quickly and easily without affecting its price.
Therefore, a cryptocurrency with high liquidity is actively traded on several exchanges with many buyers and sellers.
This makes it easier for investors to enter and exit positions without causing large price swings.
Therefore, blue-chip digital assets should be more likely to be traded on many exchanges with a deep order book.
As a result, buyers and sellers are always readily available, making it easier for traders to trade without experiencing significant price changes.
A highly interchangeable cryptocurrency can be easily traded for other assets, such as fiat currency, other cryptocurrencies, or goods and services.
Course sellers and businesses accept Ethereum, Bitcoin, and USDT as payment mediums. With the introduction of p2p on crypto exchanges, users can easily convert their cryptocurrency to fiat currency.
This is important because it makes the crypto asset more liquid and accessible, which can lead to increased demand and a higher price.
Level of Decentralization
Blue-chip digital assets should always have a high level of decentralization to minimize volatility and risk.
Decentralization means that they are not controlled by any single entity but rather by a network of users, making them more resistant to manipulation and censorship while giving users more control over their funds.
Many Use Cases/ Long-Term Potential
Its practical use cases and long-term potential are key factors that make crypto a blue chip.
These cryptocurrencies often have clear use cases and will likely be around long-term.
For example, Bitcoin (BTC) is a blue-chip cryptocurrency because it is the first and most well-known cryptocurrency.
It has a large market capitalization and is used by millions worldwide, including countries like El Salvador that adopt it as legal tender. Additionally, Bitcoin has a clear use case as “digital gold.”
Moreover, a cryptocurrency in this category should be used for various purposes.
For instance, Ethereum is used to power decentralized applications (dApps), a new type of application that runs on the blockchain. They offer a variety of features that are not possible with traditional applications.
Regarding technical analysis, a blue-chip cryptocurrency typically has a low beta coefficient.
As a result, its price movements are not as closely linked to the overall market, which can be beneficial during market volatility.
This indicates that the asset is less likely to experience sudden and significant price changes when the market experiences ups and downs.
Top 5 Examples of Blue-Chip Crypto
The following are some popular examples of cryptocurrencies widely regarded as blue chips.
Bitcoin is the world’s largest and most successful cryptocurrency.
It was first released as open-source software in 2009 and is based on a peer-to-peer network that allows users to send and receive payments without a central authority.
This digital asset has existed for over a decade. It has since been adopted by millions of people, businesses, and countries as a legal tender, store of value, and means of payment.
It is also often considered a long-term investment with the potential to increase in value over time.
Ethereum is a decentralized, open-source blockchain system with its native cryptocurrency, Ether.
ETH is the second-largest cryptocurrency by market capitalization after Bitcoin. It is a programmable blockchain, meaning developers can create decentralized applications (DApps) and smart contracts.
This coin is undoubtedly a well-established and widely used platform, with many developers and users constantly working to upgrade and improve it.
Binance Coin (BNB)
Binance Coin (BNB) is a well-known cryptocurrency among the top 10 by market capitalization.
It is a blue-chip cryptocurrency that can be used to pay transaction fees on the world’s largest crypto exchange, Binance. BNB can also be used to trade and invest in other cryptocurrencies.
Ripple (XRP) was created in 2012 as a payment system. It is the native token of the Ripple network and is designed to enable fast and secure cross-border payments.
Meanwhile, Ripple’s technology is used by banks and financial institutions across the globe to facilitate cross-border payments.
For example, Santander Bank uses Ripple’s technology for its One Pay FX app, which allows customers to send money internationally. Another example is American Express, which uses Ripple’s technology for its FX International Payments platform.
Cardano is a global blockchain platform with its cryptocurrency, ADA. A programmable network can create other applications and digital assets, such as NFTs and crypto tokens.
Known for its focus on energy efficiency, Cardano claims to solve older cryptocurrencies’ scalability and sustainability issues.
Cardano is considered a blue-chip cryptocurrency because it has a large market capitalization and is widely used.
Founded by Charles Hoskinson, who co-founded Ethereum, ADA has been around since 2015 and has been growing in popularity ever since.
What you Need to Know About Blue Chip Stablecoins.
Just like cryptocurrencies, Blue Chip Stablecoins are stablecoins that are considered to be the most reliable and trustworthy.
They are usually backed by a reserve of assets held in a reputable bank account or other financial institution.
These stablecoins are designed to maintain a stable value. They are often used as a value store or a means of payment by millions of people and several companies and institutions.
Some examples of Blue Chip Stablecoins include Tether (USDT), USD Coin (USDC), and DAI.
However, Tether (USDT) is the most popular and largest stablecoin pegged to the United States dollar, followed by USD Coin (USDC), which currently has over $25 billion in market share.
Blue Chip Cryptos vs. Blue Chip Stocks
In the stock market, a blue chip is the stock of a large, well-established, and financially sound company with a long history of profitability and operation.
Companies with up to $10 billion in market capitalization are typically seen as blue-chip companies.
Some good examples are:
- American Express
- and other large-cap firms.
On the other hand, as I’ve mentioned earlier, blue-chip cryptocurrencies are typically projects that have been around for a long time, have a large market capitalization, have a wide community of supporters, have practical use cases, and are well-known and respected in the cryptocurrency community.
How to Invest in Blue Chip Cryptos
Step One: Choose Where to Buy Crypto
The first step in investing in blue chip cryptos is to choose where to buy them.
There are several different exchanges where you can buy and sell cryptocurrencies, so it is essential to do your research and choose one that is reputable and has a good track record.
Step Two: Fund Your Account
Once you choose a cryptocurrency exchange, you must fund your account. This can be done by depositing fiat currency (USD or EUR) or cryptocurrency from another exchange or wallet.
Step Three: Buy Crypto
After you have chosen a crypto exchange and funded your account, you can begin buying your blue-chip cryptocurrencies.
The most common way is to place a market order to purchase the coin at the current market price.
You can also set a limit order to buy the cryptocurrency at a specified price or better.
Step Four: Store Your Crypto
It is essential to store your cryptocurrencies safely and securely.
There are several different ways to do this, but some of the most popular options include
- hardware wallets
- software wallets
- leaving them on the exchange you purchased them from.
No matter your chosen method, you must choose a reputable and secure wallet. You should also create a strong password and keep your seed phrase (a unique string of words that gives you access to your crypto) in a safe place.
How to Maximize Your Crypto Portfolio Investing in Blue-Chip Crypto
To maximize your crypto portfolio by investing in blue-chip crypto, you should consider diversifying your portfolio.
A well-balanced crypto portfolio contains multiple types of cryptocurrency with different use cases and risk levels.
Balancing your crypto and overall investment portfolios is a crucial part of a well-balanced crypto portfolio.
Because cryptocurrency is a high-risk investment, it should only make up a small portion of your total assets. Limiting cryptocurrency to between 5% and 10% of your overall portfolio is a good rule of thumb.
You can also consider buying market leaders like Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB) or focusing on cryptocurrencies with different use cases.
The best way to be safe during the bear market is to have most cryptocurrencies in a stablecoin like USDT. As the market keeps going down, you buy more blue-chip cryptocurrencies.
Alternatively, suppose you have a skill you can offer in the crypto space, such as content writing, marketing, blockchain development, community management, etc. In that case, the bear market is always when to dust your CV and start applying for jobs.
Blue Chip NFTs: What are they?
They typically have a large following of collectors, a high volume of transactions, and a history of holding their value over time.
Notably, most of these NFTs are considered the cream of the crop and are often owned and invested in by global influencers, celebrities, and other prominent individuals.
4 Blue Chip NFTs
Of the approximately 50,000 NFT collections available on various NFT marketplaces like Opensea, Rarible, Magic Eden, etc., some are considered “blue chips” due to their features, popularity, and community.
The following are four popular examples of blue chip NFTs in existence today:
- Bored Ape Yacht Club
- Art Blocks
Bored Ape Yacht Club
The Bored Ape Yacht Club (BAYC) is a collection of 10,000 unique ape NFTs with distinct characteristics, such as facial expressions, clothing, and accessories.
The apes are created using a combination of 170 traits, making each unique and collectible.
Stored on the Ethereum blockchain, the BAYC NFTs can be bought and sold on popular NFT marketplaces like OpenSea.
The floor price for a BAYC NFT is around 43,000 USD, but some apes have sold for much more, such as the Bored Ape #8817, which sold for 3.4 million USD in September 2021.
CryptoPunks is another collection of 10,000 24×24 pixel art images of punks, generated algorithmically and released in 2017.
They are considered one of the first NFT projects and have become one of the most valuable, with some selling for millions of dollars.
Each CryptoPunk has unique attributes, such as hairstyle, eyewear, and accessories.
There are also rare CryptoPunks with unique attributes, such as the Alien Punks, of which only nine exist. Meanwhile, scarcity often makes NFTs have high prices.
Azuki is a collection of 10,000 anime-inspired NFTs released in January 2022.
The collection has been one of the most successful NFT projects, with a floor price of around $7,000. Azuki NFTs are known for their high-quality art, unique traits, and strong community.
Additionally, the project has received praise for its innovative roadmap, which includes plans for a metaverse, merchandise, and other real-world items.
Art Blocks NFTs have become some of the most valuable NFTs on the market, with a Fidenza NFT selling for over $6.9 million in February 2022. It has a floor price of 0.68 ETH (about $1,105).
Art Blocks is a platform for creating and collecting generative art NFTs, artworks created by algorithms rather than human hands. Art Blocks artists create algorithms that generate unique artworks on demand.
When collectors mint an Art Blocks NFT, they purchase the rights to a unique artwork generated by the artist’s algorithm.
H2 – How to Maximize Your Portfolio Investing in Blue-Chip NFTs
Investing in blue-chip NFTs is a great way to maximize your portfolio. Here are some tips to help you do so:
- Do your research and only invest in NFTs from reputable projects with a strong track record.
- Diversify your portfolio by investing in various NFTs from different projects and collections.
- Be patient, and don’t expect to get rich quickly. NFT investing is a long-term game.
- Only invest money that you can afford to lose.
Keep in mind that you’ll need to pay gas fees. Meanwhile, investing in NFTs is a risky proposition. There’s no guarantee that the value of your NFTs will increase over time.
Frequently Asked Questions (FAQs)
What is the next blue-chip crypto?
It is difficult to say which cryptocurrency will be the next blue chip, but it will have the potential to become a major player in the market.
It must have a strong underlying technology, a large and active community, and a clear roadmap for future development.
What is red-chip crypto?
Red-chip cryptocurrencies are newer, less established cryptocurrencies with a smaller market capitalization and a higher risk of volatility.
Is it a good idea to invest in blue-chip cryptocurrencies?
It depends on your circumstances and risk tolerance. If you are a beginner investor, it is generally advised to start with a small investment in blue-chip cryptocurrencies.
This will help you learn more about the market and assess your risk tolerance before investing more money.
Which is better, 1 Bitcoin or 16 Ethereum?
There isn’t a one-size-fits-all answer to this. It depends on your preference. One bitcoin is the answer for someone looking for a safe and less volatile investment vehicle.
For someone looking for a safe and medium volatile investment vehicle, 16 Ethereum is the answer.
Why do some people like blue-chip companies for investing?
Blue-chip companies are well-established, profitable, and pay dividends, making them a good investment for investors. They have a low-risk level.
Is holding cryptocurrency for the long term a good strategy?
Holding cryptocurrencies long-term can be a good strategy for some, but it depends on the coin and the period in the market. Read crypto narratives to understand when to buy and how long to hold your coin.
Is Bitcoin a good investment for a first-time investor?
First-time investors should only invest in Bitcoin if they are comfortable with the risks and have a long-term investment horizon.
They should also start with a small amount of money and gradually increase their investment as they become more familiar with the asset.
Will cryptocurrency still be around in the next 5–10 years?
Cryptocurrencies are just getting started. It will be around in the next 5–10 years and beyond due to increasing adoption by individuals, businesses, and institutions, the growing popularity of blockchain, and the development of more secure platforms.
What would happen if I put $1000 into every cryptocurrency?
Investing $1000 in every cryptocurrency is not recommended, as most cryptocurrencies are worthless and highly volatile, leading to a potential investment loss due to market forces.
It is important to research and only invest in cryptocurrencies with strong underlying technology and real-world use cases while only investing money you can afford to lose.