A look at blue chip cryptos and NFTs

When it comes to investment advice, people often suggest going for “blue chip stocks”. These are financially, and fundamentally sound securities that are often portrayed as safe investments, especially in the long run.

Now, like many things from traditional finance, this ‘blue chip’ tag and the ethos of investing in large projects has also trickled down to the cryptocurrency and NFT markets. Keeping this in mind, we have quickly explained what this blue chip classification means and which projects fall under this banner. Let’s go!

The term “blue chip” is derived from the game of poker. The game has red chips, green chips, and blue chips. Out of the three, the blue chips hold the highest value. Hence, this term was initially used in the 1920s to describe stocks trading at a higher price than the rest. However, this blue-chip tag now refers to stocks of established companies and institutions that have grown and become mammoths over time.

And with the emergence and rapid adoption of digital assets, the term is now being used in cryptocurrency and NFT markets as well. Blue chip cryptos refers to major tokens that have established themselves as pioneers in the asset class and have a solid reputation among their peers. Blue chip NFTs refer to projects that have witnessed stable growth in financial value over a period.

Here are some more factors that cryptos/NFTs must satisfy to qualify as blue-chip projects:

• Legacy in the market

• The credibility of the founder(s)

• Institutional support

• High liquidity/interchangeability & market cap

• Low volatility

• Extent of decentralisation

Now let’s look at some blue-chip cryptos and NFT projects in existence:

Although there are thousands of cryptocurrencies, Bitcoin is usually the first name that pops up when digital assets are mentioned. Bitcoin is the longest surviving cryptocurrency with the highest market capitalisation of 39.6 percent and is thus inevitably among the blue-chip projects. Over and above its age, Bitcoin also checks all boxes on the above list of criteria. Bitcoin is also the most correlated with the stock market than any other cryptocurrency and therefore reacts first to major stock price movements.

Ethereum is the second largest cryptocurrency behind Bitcoin, with a market capitalisation of 17.7 percent. This second-generation cryptocurrency finds itself at the top of the crypto usage leaderboard thanks to its novel smart contracts system. Several DeFi projects and over 3,000 decentralised applications (dApps) call the Ethereum blockchain home, and this is why it has received significant backing from financial institutions. Also, the blockchain has just transitioned from a proof-of-work mechanism to a proof-of-stake mechanism during ‘The Merge,’ which places it perfectly to initiate savings on transaction costs and gas fees in the future.

This is the native cryptocurrency of Binance, the largest crypto exchange in the world by trading volume. It was launched in 2017, making it much younger than Bitcoin and Ethereum. Yet, it has quickly climbed to the third position in market capitalisation (4.5 percent). It boast multiple use cases and a multi-national presence, making it one of the most sought-after projects in the cryptosphere.

Other blue-chip crypto projects include Ripple (famous for its instant global money transfer capabilities) and Cardano (launched as Ethereum’s rival).

Now let’s also delve into blue-chip NFTs and see what they entail:

The BAYC is a collection of 10,000 NFTs, each featuring a bored-looking ape with a unique combination of accessories. Created by Yuga Labs, this NFT collection has attracted many celebrity investors, including Madonna, Justin Bieber, Jimmy Fallon, and Post Malone, among others. Since then, these NFTs have been selling for hundreds of thousands of dollars each, making the entire project worth billions. In March 2022, the project’s overall sales volume surpassed the $2 billion mark.

This is the first Ethereum-powered NFT project launched by Larva Labs and remains popular to this day. The Crypto Punks collection was launched in 2017, making it as old as the BNB Chain. With 10,000 unique characters, this project is considered the inspiration for all blockchain-backed digital art. The total sales of this art collection stand at $1.08 billion. Some other popular blue-chip NFT projects include Cool Cats, Art Blocks and Azuki.