By Larry Wright
Introduction
There are thousands of cryptocurrencies available in the DeFi sector at present. However, much like tech and other startups, the chances for a cryptocurrency project to survive and make it big are also considered rare. This article is going to shed light on blue chip crypto for the benefit of the reader.
What are Blue Chips?
Blue Chip was used in casinos to define the highest bidding or betting chips in the game of poker. It was popularized by Dow Jones trader Oliver Gingold in 1923 to describe companies with a stock evaluation of $200 or higher per unit.
Since that time, the term has been used to define the most successful business ventures and enterprises that have managed to reach the top of their sector in terms of performance and evaluation.
What are Blue Chip Cryptos?
Viewing cryptocurrencies under the lens of blue chips is used to define top crypto projects. However, rather than shares, the term is used to define blockchain projects that have managed to gain the largest evaluation in terms of per unit price of their cryptocurrencies.
Some blue chip cryptocurrencies are top blockchain projects such as Bitcoin and Ethereum. Another reason for categorizing these two crypto options as blue chips are that they have been around for a longer duration than the newer options.
Thus, investors may view blue chip cryptocurrencies as more stable. These cryptocurrencies may also retain a sizeable portion of the total market cap, making them less risk averse.
Features of Blue Chip Cryptocurrencies
Here are some important features that can qualify cryptocurrencies as blue chips:
Stability
Blue chip cryptocurrencies are typically older than other cryptocurrencies. For example, Bitcoin, with the biggest per-unit price evaluation, is the first-ever decentralized blockchain that was introduced in 2009.
Since Bitcoin has been around for such a long time, it has been able to go through the issues and turbulences that other DeFi products faces, such as loss of liquidity, lack of adoption, and hack attacks, and survived all these problems. Thus, the position of this cryptocurrency blue chip has been cemented in terms of stability.
The Reputation of the Developers
Blue chip cryptocurrencies may also depend on the reputation of their founders to become successful. A blue chip is a term that is used to define a corporation in general, but since blockchains are decentralized, therefore the investors have to look at the core developer of these projects.
The projects that have been initiated by the founder who carries goodwill among their peers can get better traction among users.
Enterprise Adoption
Ethereum is the second largest cryptocurrency project. This blockchain was able to collect the attention of some important financial investors, such as Winklevoss Capital, Maven 11 Capital, and Pipeline Capital, among others.
In the same manner, some of the biggest investors and companies collaborate with blockchain projects that increase their potential of morphing into blue chip cryptocurrencies.
Market Cap
The market cap of a blue chip cryptocurrency project is usually much larger in comparison to its counterparts. The main reason for a massive market cap evaluation is the increasing traction of the blue-chip cryptocurrency.
Blue chip cryptocurrencies also consist of a considerable portion of the entire crypto market cap or market dominance.
Liquidity
Higher liquidity is one of the key requisites to make a cryptocurrency project successful. Blue chip cryptocurrencies are listed by all major exchanges, DEXs, and OTC trading platforms. Therefore, they offer a considerable amount of liquidity, making them more feasible investment options.
Conversion Rate
Cryptocurrencies at their base are a substitute for fiat currencies. Their adoption can help them elevate to levels such as being used as a unit of exchange to becoming a unit of account.
Therefore, the conversion rate of blue chip cryptocurrencies is usually easier and greater than their contemporaries.
Smaller Volatility
Since blue-chip cryptocurrencies have long-term and large-scale investors, they tend to suffer from a lower rate of price change or volatility.
During bear markets, when other crypto traders are getting rid of their positions, blue chip crypto investors have greater chances of holding their positions which reduces their price volatility.
The Ratio of Decentralization
Blockchains are focused on achieving a decentralized mode of transaction network. By design, more cryptocurrency projects aim to be decentralized.
However, blue chip cryptocurrencies manage to achieve the closest to true decentralization in that they are completely owned by their community, have a democratic governance model, and do not operate under the supervision of any private or government financial enterprise.
Conclusion
Blue chips in crypto depend on important factors such as investors, traction, practical utility, founders, and others. Blue chip cryptocurrencies are often favoured by whale investors and enterprise interests. These projects overcome difficult problems in a simple and adaptable way; therefore, they are considered ideal for investing.