What are Blue Chip Cryptos: Are They Safe Bear Market Options?
This is nothing new: when financial market prices start to fall, investors immediately seek refuge in a safe asset with a stable fundamental value. In other words, they are looking for blue chips.
The same can be said about the cryptocurrency market. Blue-chip cryptocurrencies like Bitcoin and Ethereum have been around longer, have a solid reputation, and are more stable than other cryptocurrencies and blockchains, making them a popular option for investors in cryptocurrency bear markets.
In this guide, we’ll dive into blue chip coins and look at what they are, how they work, how they differ from blue chip stocks, and most importantly, how to invest in them to reduce your risk while enjoying long-term profits. .
What are Blue Chip Cryptos?
Blue chip scrips are established cryptocurrencies with institutional status, solid reputation, higher liquidity, lower volatility and significant market capitalizations.
The term “blue chip” comes from the game of poker. In 19th century America, poker dominated the frontier landscape, as red, white, and blue chips frequently changed hands. The blue chip has always had the highest value.
The term is generally believed to have first been used to describe stocks in the 1920s. According to reports, a Dow Jones employee coined the term after noticing that some stocks were trading much higher than others.
Over the century, “blue chip” has come to refer to much more than just expensive stocks. Today, it refers to securities issued by established, financially stable companies with a solid reputation for weathering the storms and standing the test of time.
When it comes to cryptocurrencies, the definition of “blue chip” remains largely the same. Blue chip coins like Bitcoin and Ethereum have established themselves as institutions in the crypto/blockchain space.
Bitcoin is the original and probably the most established cryptocurrency. While still volatile at times, it has managed to steadily increase in value since its inception in 2008.
Ethereum has also grown incredibly both in terms of visibility and value. As a DeFi pioneer and primary platform for non-fungible tokens (NFTs), its blue-chip status is in no danger of disappearing any time soon.
Due to their relatively recent emergence, blue-chip cryptocurrencies like Bitcoin and Ethereum haven’t quite stood the test of time like their similar cousins. However, they have weathered recessions and bear markets and are considered financially stable by the masses.
Blue Chip Cryptos vs. Blue Chip Stocks
Traditional blue chip stocks are usually included in reputable indices such as the Dow Jones Industrial Average, the S&P 500 and the NASDAQ in the US. In the UK, blue chip stocks call the FTSE UK index their home. While there is no definitive measure of market cap, the generally accepted measure of a blue chip stock is a market cap of $5 billion.
Examples of companies with blue chip status are Amazon, Google, Walmart, Disney, Coca-Cola, General Electric and IBM. These are all very smooth, very popular, very reliable and above all very stable. This makes them safe investments, especially in bear markets.
The same is largely true of blue chip scripts. Over 18,000 different cryptocurrencies have been minted and more are being added every day. However, few have built solid reputations or achieved a market value worthy of blue-chip status.
Despite the fact that Bitcoin and Ethereum are fairly new and haven’t been around as long as some blue chip stocks, they have stood out as blockchain pioneers and blue chip scrips that can be trusted in almost any market situation.
What Makes Cryptocurrencies Blue Chip?
Like their blue-chip NFT counterparts, many factors distinguish blue-chip coins from the thousands of altcoin alternatives now available to risk-averse traders and investors. Some of these factors are:
Long lasting effect
First, blue chip scripts aren’t exactly new kids on the block. In fact, it’s just the opposite. They have been around for over a decade and have withstood a wide variety of market conditions. As the original cryptocurrency and founder of blockchain technology, Bitcoin has survived longer than any other, achieving its status as a blue chip cryptocurrency.
The reputation of the founder
In the traditional stock world, the term “blue chip” is used to describe an established company that is recognized around the world as a reliable investment. Blue chip companies have a strong reputation for creating high quality products or services and for weathering recessions. The same can be said for blue-chip coins like Bitcoin and Ethereum, which have strong reputations in the investment community and around the world.
institutional space
No other coin has as much institutional backing as Bitcoin. While Ethereum and its DeFi platforms are considered a blue chip by some serious investors, Bitcoin is currently on the balance sheets of companies like CME Futures, Grayscale Trust ETF, and others. Big companies like Tesla own billions of Bitcoins.
High market value
Traditionally, a market capitalization of at least $5 billion is required to earn blue-chip cryptocurrency or status equity. Bitcoin and Ethereum blow this figure out of the water as the top two performers in the cryptocurrency world. With current market caps of $1 trillion and $500 billion, they are sure to hit the mark.
Greater liquidity
High liquidity and the ability to easily enter and exit positions is another feature of blue chip coins and stocks. Billions of BTC are traded every day, so unless you want to buy or sell millions of coins, you will find a market full of liquidity when you need it.
Very interchangeable
Sending and receiving your cryptocurrencies plays an important role, especially when transferring money from one wallet to another. It can be between cryptocurrency exchanges or peer-to-peer wallets. Cryptocurrencies like Bitcoin and Ethereum need to be highly interchangeable to gain greater adoption. Users prefer to trade BTC for equivalent ETH rather than using illiquid assets such as NFTs.
Less volatility
Cryptocurrencies and volatility largely go hand in hand. While wild price swings are the bread and butter of avid traders, whipsaws can be merciless to HODLers. However, some coins are more volatile than others. While volatile blue chip scripts like Bitcoin and Ethereum don’t move as much as other cryptocurrencies, making them safer and more stable to invest in both up and down markets.
Why is BTC a blue chip cryptocurrency?
Bitcoin (BTC) ticks all of the above boxes, making it a leading blue chip script and safe haven for anyone looking for lower volatility and higher long-term growth. As the first crypto product ever created, Bitcoin has survived longer than any other cryptocurrency and is definitely a quality asset.
With its long history, it should come as no surprise that Bitcoin also has the largest market capitalization of any cryptocurrency. Indeed, BTC is such a driver in the crypto space that the price movements of other blue-chip coins and non-blue-chip coins often depend on it for guidance.
Unlike other cryptocurrencies and blue-chip coins, Bitcoin investors and traders enjoy first-mover advantage. They too benefit from the scarcity of Bitcoin. With only 21 million BTC ever available, the price of BTC continues to rise, proving to be a solid blue-chip crypto investment.