Within the traditional equity markets, a blue chip stock refers to a company that has an excellent reputation, gained through a long-term proven track record of sound company finance, growth, and long-term returns. Blue chip stocks usually have a market capitalization in the billions and are well-known industry leaders that continually provide value to both investors and consumers. Some examples of the most well-known blue chip companies are: Apple, Boeing, Amazon, IBM, Coca-Cola, Walmart, and Costco.
At the core of the term “blue chip”, is something that is reputable:
1️⃣ Blue chip companies have a proven track record and are dependable in terms of financials.
2️⃣ Blue chip companies are seen as a way to avert risk, able to survive market challenges of many kinds.
3️⃣ Have an established brand identity and are seen as a leader in their specific sector.
What is a blue chip NFT?
A blue-chip NFT is an NFT from a project that is established, stable, and considered to be a good long-term investment. They are considered to be a safer way to enter the NFT market since they have more stability and predictability in their price movement.
But how does one truly determine which NFT can be classified as Blue Chip NFT when the NFT market is itself still quite speculative without an established history to reflect upon? In this article, we’ll look at what constitutes a Blue Chip NFT and what characteristics should be considered when entering such a new and ever-changing market.
📊 A proven track record
The largest hurdle in determining a Blue Chip NFT is simply the short history of the market. Whereas the bond and stock markets have decades, if not centuries of history, to determine reliability, NFT technology is a new and emerging market, and even the most established NFT projects such as CryptoPunks were only released as recently as 2017. Although we can use many of the same determinations to classify Blue Chip NFT as we do Blue Chip stocks or bonds, there are some key differences.
First, as previously mentioned, a lack of historical data for said project. In addition, the technology involved in the Crypto space is radically different from that of a traditional centralized company. Whereas a company might be mostly reliant on its management, R&D department, or CEO, crypto communities evolve in a more decentralized way. This means the community as a whole has more sway in the direction of that project moving forward, for better or worse. Since there is a short history to draw from, let’s take a look at some of the factors investors need to use when determining the quality of an NFT project.
There is a reason Coca-cola spends over 4 billion dollars a year just on advertising. They could probably take a year off of any advertising and see no drop in annual sales, so why the never-ending onslaught of advertising? Coca-cola knows that just because you are on top, you are not guaranteed to stay there. It is one of the first large cola brands, making them historically significant, so much so that if you go to a restaurant and want a soda, you’re very likely just to assume they have either Coca-cola or Pepsi.
Blue Chip NFT need branding that makes them historically significant with strong cultural relevance. No matter where on earth you buy a coke, you’re likely to get a product that has a similar taste and standard of quality. Blue Chip stocks often are determined by their ability to satisfy their investors and stockholders, providing long-term returns for those that are long-term investors. CryptoPunks was able to establish itself simply because of how early that project came to the NFT space. Dogecoin is considered to have poor crypto tokenomics but has become a leading crypto simply from their use of a meme dog figure as their branding. NFT projects like Bored Ape Yacht Club and Cool Cats use similar branding to create projects that people like simply for their aesthetic and community culture.
Who represents your brand is another critical factor. Every year sports athletes and actors receive millions of dollars in endorsements. The idea is simple, this person has proven their reputation on the playing field or movie screen, so it’s worth trusting a brand they represent, since representing a lackluster brand would also hurt their branding as an actor or athlete.
Bored Ape Yacht Club gained popularity in 2021; with a very short history, it became very reputable because of who entered the ecosystem.
Celebrities like Paris Hilton, Post Malone, Eminem, Stephen Curry, Snoop Dogg and Justin Bieber are all ape owners, creating a cultural reputation that propelled the project as one of the most successful NFT projects ever.
Project creators are also an important part of an NFTs reputation. Some NFT project creators first came to the NFT community as NFT artists, like Cool Cats. The NFT community saw creators that were truly in the NFT space to innovate and create the type of projects worth supporting.
👷 Brand Execution
Ultimately though, the factors above rely heavily on how the project is actually executed. Does it benefit the NFT holders, deliver on its promises or even over-deliver? When Bored Yacht Ape Club decided to make their own token, they promoted the project by airdropping BYAC holders with a free Ape Coin. This meant some NFT holders were basically air-dropped tens of thousands of dollars worth of crypto simply by being a BYAC NFT participant.
The NFT market has some advantages here compared to traditional businesses. A company might replace just one key cog in its management system, but it might hold the power to do something that directly harms the brand. NFT and decentralized NFT communities can help drive brand execution in a more decentralized way, where communities make key decisions about a future road map only through community approval.
️🎯 What are Blue Chip NFT will be proven in time
If we all knew what Amazon would’ve become, we would’ve all invested everything we had into it during its IPO. Only the future will tell which projects survive, as the NFT market will eventually streamline, and many projects will go nowhere. Determining blue chip status for any investment is a key tool in determining long-term returns. Much like the established blue chip stocks, a lot of their value is determined by perception instead of intrinsic value. A blue chip is simply a broad classification of trust and reliability, but it is a key term in allowing investor confidence, the foundation of creating a balanced and fair economic market.
️🥅 The goal of creating trustworthy investment options for everyone is important. It allows for NFT, which is seen as a new form of speculative investment, to be seen as something more stable and trustworthy. Now, which NFT projects should be classified as Blue Chip NFT? That is yet to be determined, but those who understand what makes a viable NFT project and are early adopters are certain to prosper.
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