Bluechip NFTs is a buzzword that you will see scattered across Twitter and other crypto media. “Blue chip” is borrowed from traditional finance, where stocks are considered to be an extension of well-established corporations that are known for their reliability, quality, and financial stability. What exactly are blue-chip NFTs? And how do they get identified? Louisa Choe (HTMODE Nansen research analyst) comments to Cointelegraph, “NFTs are still in their infancy “…it can sometimes be difficult to apply this criteria because NFTs as an asset class are still evolving.” It is generally agreed that the blue-chip asset that is most sought-after is the one with the lowest volatility. This means it will retain its value over time. Let’s look at some of the factors that determine whether or not an NFT project is eligible for blue-chip status.
Volume is only a piece of the puzzle
Collectively, NFT investors, like any trader, look at the total volume of sales and the total market cap of the collection. Typically, when an NFT collection reaches or exceeds the sought-after 10 Ether ($30,624) level, collectors consider it to have reached blue chip status. NFT traders also use the total volume of sales to determine market health. High volumes are desirable but are they sustainable? Nansen updates their blue-chip index every 90 days, knowing that “the market is young and fickle.” As such, controversy is often sparked within the NFT market when a collection rockets to the moon with little end in sight.
On April 16, PROOF Collective launched its first proof of profile (PFP) collection, Moonbirds. The project literally skyrocketed to the moon and has already exceeded $220.8 million in total volume sales on OpenSea. The project has not been publicly listed in a week. However, some NFT pundits speculate on its value. Some believe that it has already reached blue chip status ..
However, there are pundits who disagree with the sentiment that volume is an indicator of blue-chip stats. NFT investors believe that this data point is not a good measure of an asset that is illiquid. They also argue that blue-chip NFTs are more likely to be able to sustain their value even in the face of bear markets.
NFT investors tend to rely on influential people and large-time players in the space when deciding which assets they should have.
Communities are more than the number of unique holders
It is important to note that blue-chip status is not defined by numbers alone, but the sentiment and dedication of the community. Trades can be replicated, but communities cannot. Choe says that while trades can be replicated, communities and the network effect are key to the success of NFT projects. The number of unique holders is often the first metric used to measure the adoption of a project. However, this metric is not the most reliable.
Counting the number unique holders means that one records the number wallets holding the asset. Since this is the case, one owner could own 1,000 assets and place each in their respective wallet, resulting in a measure of 1,000 unique holders when in actuality, there is just one. NFT investors frequently list the number of unique holders and communities as factors in determining whether an NFT is blue-chip worthy. When assigning blue-chip status to an NFT and considering its community, Choe explains that “…NFT projects are seeking to build an entire ecosystem that generates value as opposed to concentrating on one utility.”
Monetary Value/social value
— DaVinci Elo (@dzepss) March 4, 2022
Communities represent more than numbers. They are individuals who have different levels of convictions and beliefs about the project and the ecosystem.
The Bored Ape Yacht Club’s magic was that it was a community that was self-sufficient and was able to accomplish what they didn’t expect. BAYC not just accumulated over $1 billion in volume but also gained global media attention in less than a year. If volume and the number unique holders become a static focal point of what is considered a Blue-chip, then Moonbirds would flip other blue-chips in total volumes to make it one. In fact, Moonbirds has already gained over 6,681 holders out of a collection of 10,000 NFTs and the most profitable former Moonbird holder made nearly $2 million by selling 45 MoonBirds. To date, some of the most profitable investors made over $450,000.
It is common to say that an asset is worth the price it is being offered by the market. However, the market can sometimes perceive this differently and make it more or less valuable.
Blue-chip value extends beyond price
Oftentimes, market value and market capitalization are used interchangeably, making it dicey to evaluate the real value of an NFT. Market value provides investors with a more comprehensive view of a project’s financial status, and also helps them determine their investment opportunities.
Interestingly, market value determines how much an investor is willing to pay for an asset, but market value is also heavily influenced by market perception and sentiment. Volatility in sentiment in NFTs markets can be seen in total sales volume and growth, as well as members voting to sell their assets.
NFT market are still young and volatile. The biggest blue chip, BAYC has yet to reach its anniversary. It has shown its ability to grow and sustain over time.
Liquidity in the sector often circulates from one project to another, which leads some assets to remain illiquid in the sense that they cannot be sold easily when desired. Blue-chip NFTs can fluctuate in price over time but they are still valuable in that if sold at or below their floor value, they will be bought quickly.
Market value is nuanced. This is due to the sentiment in the market, their perception of a product/brand and also the influence of the macro cryptocurrency markets. Assets are likely to take a tumble and can be considered risky. Many NFT collectors will continue to invest their money blindly or strategically, in the hope of securing a blue-chip investment.
Time seems to be more important than brand equity, price history, and volume history when it comes down to determining whether an NFT is blue-chip. This means that it is more important to track the asset over time than to focus on momentary performance in order for a project to be justified in its present value.
NFT investors may have different opinions about what constitutes a blue-chip. It’s important to emphasize how young the market is. An easier way to assess blue-chip status is to track quarterly total sale volume, buyer/seller ratios, and project roadmap or community developments.
The views and opinions expressed in this article are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.