The term blue chip got its name from the poker table, as the blue coloured chip always represented the highest value amongst all other coloured chips. Henceforth, ‘blue chip’ has been adopted in the world of finance to denote stocks of well-established, profitable companies that have a good track record. This term has since been used in general to describe any worthwhile or valuable investment that has a reliable track record. Examples of blue chip stocks would be Apple, Walmart and Amazon.
What Are Blue Chip Cryptocurrencies?
Just as blue chip stocks would mean stocks of valuable companies with a good track record, blue chip cryptos are cryptocurrencies of relatively longer history, strong reputation, higher liquidity and larger market cap. A large market cap also makes blue chip cryptos less volatile than other smaller cryptos.
Top 5 Blue-Chip Cryptocurrencies
After looking at what makes a blue chip crypto, let us list down five top blue chip cryptos for your further understanding.
1. Bitcoin (BTC)
As written in its whitepaper, Bitcoin (BTC) was born out of the dream to decentralize the global financial system and was the first real world use of a permissionless and decentralized blockchain.
Being a first-generation blockchain, BTC has the longest history and has never been hacked into nor has it ever failed to process any transaction. Hence, it is recognised as the most reliable crypto to exist and is commonly used as a store-of-value due to the trust pundits have in it.
BTC is viewed as a blue chip crypto due to its longevity and immutable track record. Furthermore, as the de facto crypto, it is being adopted by institutional investors and retail investors alike, who add to its liquidity and market value, which reinforces its blue chip crypto status. To further demonstrate the blue chip status of BTC within the crypto world, all other blockchains which are not Bitcoin are referred to as altcoins. At the point of writing, BTC is down around 65% from its all-time-high.
2. Ethereum (ETH)
Ethereum (ETH) was created by Vitalik Buterin in 2014 as an improved version of Bitcoin that can support the running of decentralized applications. The Ethereum blockchain, being the first that can execute smart contracts, is what raises its profitability profile and the key reason why ETH is a blue chip crypto. The ability to have dApps built and run on it will greatly increase usage and adoption, which in turn increases the value of ETH. Furthermore, ETH also supports non-fungible tokens, which we will discuss in greater detail later.
Like BTC, ETH’s 7-year history and broad adoption by varied classes of investors makes it highly liquid, and hence, reduces its price volatility compared with other altcoins. ETH has become the second largest crypto in terms of market capitalization for these reasons. At the point of writing, ETH is down around 63% from its all-time-high.
BTC and ETH are the blue chip cryptos that investors turn to when the markets are experiencing a bear cycle because they have been through multiple crypto market cycles and are still standing strong today. Going by the Lindy effect where, the longer something has been around, the longer it will continue to remain, these two blue chip cryptos are likely to make it through many more crypto bear markets and outlast many other coins.
3. Solana (SOL)
Solana (SOL) is similar to ETH in function, but aims to become a cheaper, faster and more scalable version of it by using a different way to verify transactions. SOL’s popularity rising from being cheap and fast has helped it gain widespread adoption and propelled it into a blue chip crypto that is popularly used within a short period of time in under two years.
4. Cardano (ADA)
Cardano (ADA) is another popular blue chip crypto. It was launched in 2017 and is older than SOL. ADA boasts of being a third generation blockchain which promotes scalability without sacrificing transparency and decentralization.
5. BNB (Binance Coin)
Although also the native token of a blockchain, BNB is the utility token of the world’s largest centralized cryptocurrency exchange, Binance, as well as the de facto payment token for defi platforms built on the BNB Chain. The BNB ecosystem has grown tremendously ever since its launch in 2017 due to its relationship to the world largest crypto exchange as well as its cheap fees and lightning speed.
Factors That Drive Growth in Blue Chip Crypto
Now that we know what blue chip cryptos are, let us discuss what drives their growth.
Number of Uses and dApps
The higher the number of uses of a blockchain, the more users can be attracted to it. The more users are attracted, the more reliable a blockchain is perceived to be, which becomes a self-fulfilling situation. In this regard, a blockchain that has more applications and usage automatically generates higher adoption as there are more use cases and becomes a blue chip.
As a crypto grows in value proposition, institutional investors with a longer investment horizon and more funds to invest can drive the price of a blue chip crypto a lot higher.
Crypto market moves in cycles. In a bull crypto cycle, blue chip crypto prices move much faster and higher than when in a bear market.
Investing in Blue Chip Crypto Tokens
Buying blue chip cryptos is often the most stable and secure way one can earn from investing in cryptocurrencies. The examples given above are commonly referred to as the mainstream cryptocurrencies which the conservative investor may prefer for their reputation but could suffer in terms of upside volatility. For some other investors, they may prefer to catch the early bird and invest in other coins that have the potential to become the next blue chip crypto before other investors do.
Next Potential Blue Chip Cryptocurrencies
So, what are some cryptos that may become the next blue chip?
First, let us look at some payment tokens:
XRP is the cryptocurrency native to payments platform RippleNet, which is owned by San Francisco based firm Ripple Labs. RippleNet, which was initially created as Opencoin in 2012 as an alternative to the interbank SWIFT system, enables instant fund transfer via RTGS to any destination worldwide.
Zcash is another payment token, albeit with privacy features that can mask the trail of the value transfer. ZEC emerged in 2016 when a group of scientists wanted to create a cryptocurrency similar to Bitcoin but wished to keep the sender and recipient’s information fully anonymous.
The DeFi Blue Chip Cryptos
Another category of blue chip cryptos are those used in DeFi, which has gained immense popularity due to the yields it can generate for investors. This category of crypto has good potential to become blue chips.
Chainlink is a bridge that connects data to different blockchains and its one of the most important tokens for DeFi since it is required in order for real life data to be fed to various decentralized platforms for them to do price discovery and predictions.
Aave is a decentralized lending platform that allows for the loaning and borrowing of cryptocurrencies. It helps hodlers of crypto generate returns by lending their idle crypto out for a yield and provides traders who wish to short a crypto the opportunity to borrow it for a fee. The platform is built on Ethereum and the AAVE token is an erc-20 token run on Ethereum.
Uniswap is the world’s first decentralized exchange. It took the Bitcoin dream of a decentralized financial landscape a step further by making non-custodial exchange-of-value possible, without the need for an intermediary.
List of Reliable Blue Chip Cryptos You Can Invest on Margex
The Margex platform has a broad mix of current and potential blue chip cryptos you can invest in. The team is actively expanding the list to bring more valuable additions to its users. Currently, the reliable blue chip cryptos you can trade on Margex include BTC, ETH, SOL, XRP, LTC, ADA, UNI, plus more on the way very soon.
What is a Blue Chip NFT?
Similar to a blue chip crypto, a blue chip NFT is a non-fungible token that is well-known and is offered by more established founders who already have made a name for themselves and are thus considered more reliable. Some NFT brands like Larva Labs and Yuga Labs have made a name for themselves over the years, having created noteworthy blue chip NFT projects like Crypto Punk and Bored Ape Yacht Club that are highly valued by NFT collectors. These NFTs are viewed as good for long-term investments since they already have a good track record and have been around for a relatively longer duration within the NFT space. The key price driver for NFTs is their rareness, as only one of its kind can exist.
Now that we have covered what blue chip cryptos and NFTs are, let us do a quick recap on what we have learnt.
What Makes a Crypto Blue Chip?
A blue chip crypto has several distinguishing factors that make it stand out from thousands of other cryptos. Some of these factors are, length of history, founder’s reputation, amount of decentralization, level of adoption, liquidity of the token in the cryptocurrency market, its market capitalization, as well as historical volatility.
What are blue chip contracts?
Blue chip contracts are investment instruments of well-established, financially sound, and reliable cryptocurrencies or company stocks.
Why Is BTC a Blue Chip Crypto?
BTC is a blue chip crypto because it has the longest history, the largest market cap, highest liquidity, and is held by institutional and large corporate investors like MicroStrategy who do intensive research on their investment subjects before putting in their money.
Why Is ETH a Blue Chip Crypto?
ETH is a blue chip crypto due to similar reasons as BTC, like long history, institutional ownership, high market cap and trading liquidity. On top of these reasons, ETH has the added benefit of having more use cases which can drive adoption to much higher levels and increase investor confidence.
What is a Blue Chip NFT?
A blue chip NFT is a good quality non-fungible token that is minted by established founders and is rare.
Why are blue chip NFTs important?
Blue chip NFTs are important because they are a fun way to invest while also providing high returns to the investor who finds learning about web3 too tedious.
Highly prized blue chip NFTslike CryptoPunks, Cool Cats, and VeeFriends NFT project have been made investment parallels with blue chip stockslike Apple, Walmart, and even Visa.