Blue-chip (top-notch) NFTs is a popular phrase one will find scattered across Twitter and various cryptocurrency media outlets. ANDhe term, “blue chip,” is borrowed from traditional finance where the stocks being considered are the well-established extension of corporations known for their quality, reliability, and financial stability.. But what exactly are blue chip NFTs and how are they identified?
Nansen Research Analyst Louisa Choe tells Cointelegraph that since NFTs are still in their infancy, “…it is sometimes challenging to apply this yardstick as NFTs as an asset class are still evolving.” The general consensus is that the highly sought after blue chip is the asset with the least volatility, which means that it maintains its value over time.
Let’s explore some of the factors that go into determining whether a particular NFT project qualifies to be blue-chip.
Volume is just one piece of the puzzle
On the whole, NFT investors, like any trader, look at the total sales volume and the total market capitalization of the collection. Typically, when an NFT collection reaches or exceeds the coveted 10 Ether ($30,624) level, collectors consider it to have achieved blue chip status. Total sales volume is also another piece of data that NFT traders look to as a yardstick to determine if the market is healthy.
Although high volumes are desirable, are they sustainable and do they reflect blue-chip status? Nansen updates its blue-chip index every 90 days, knowing “the market is young and fickle.” As a result, controversy often breaks out within the NFT market when a collection shoots for the moon with little end in sight.
On April 16, PROOF Collective released its first Proof of Profile (PFP) collection, Moonbirds. The project has literally shot to the moon and has already surpassed USD 220.8 million in total sales volume on OpenSea. Although the project has only been trading for a week, its explosive growth has left some NFT pundits speculating on its potential value, with some believing it has already reached its peak. blue chip status.
However, there are experts who disagree with the idea that the volume be an indicator of blue-chip statistics. Some NFT investors argue that it is difficult to assign this data point as a measure for such an illiquid asset and that the impression of a blue-chip NFT was that it could hold its value by surviving a bear market.
Other NFT enthusiasts seem to lean on influencers and big players in the space to determine which assets to fill their bags with.
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 by community sentiment and dedication. Operations can be reproduced, but communities cannot. “Communities and thus the network effect are definitely the key drivers of success for an NFT project,” says Choe. Often, The first metric looked for to determine the adoption of a project is the number of unique holders. However, even as a quantifiable metric, it is not the most valid.
Counting the number of unique holders simply means that the number of wallets that have the asset in question is being recorded. As this is the case, an owner could own 1,000 assets and place each of them in their respective wallet, resulting in a measurement of 1,000 unique holders when in reality, there is only one.
Nevertheless, NFT investors often cite communities and the number of unique holders as a factor in why they consider an NFT to be of blue-chip caliber. By assigning blue-chip status to an NFT and considering its communityChoe explains that “…NFT projects seek to build an entire ecosystem that generates value instead of concentrating on a utility.”
originality
Community
Utility
Monetary Value/social value
Innovation
Historical significance— DaVinci Elo (@dzepss) March 4, 2022
Originality
Community
Utility
Monetary value/social value
Innovation
historical significance
Communities are more than just numbers, as they represent individuals with different levels of belief and convictions towards the project and within the ecosystem.
Part of the magic of Yuga Lab’s Bored Ape Yacht Club was that it was a self-sustaining community that executed what they hadn’t anticipated. BAYC not only amassed over $1 billion in total volume, but also grabbed the attention of the global media in just under a year.
If the volume and number of unique holders become a static focal point for what is considered a blue chip, then Moonbirds, surpassing other blue-chips in total volume, would make it a default one. In fact, Moonbirds have already earned over 6,681 holders from a collection of 10,000 NFTs and one former most profitable Moonbird holder made nearly $2 million from the sale of 45 MoonBirds. To date, some of the most profitable investors have earned more than $450,000.
An asset is often said to be worth what the market is willing to pay for it, and sometimes the market’s perception can rise or fall from this valuation.
The value of a blue chip extends beyond the price
Often, Market value and market capitalization are used interchangeably, which makes it risky to assess the true value of an NFT. The market value is nuanced in the sense that it provides a broader vision to determine the financial situation of a project, but also determines the respective investment opportunities of the investors.
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. For the NFT markets, volatile changes in sentiment can be seen in total sales volume, growth, and members voting with their assets selling.
NFT markets are young and fickle because the biggest blue chip yet, BAYC, hasn’t even reached its anniversary yet. However, it has shown its ability to maintain and increase its value over time.
Liquidity in the sector tends to circulate from one project to another, which means that some assets remain illiquid in the sense that they cannot be easily sold when desired. However, blue chip NFTs can fluctuate in price over time, but their value remains in the sense that if they were listed for sale at or below ground value, they would be bought quickly.
The market value has nuances. Not only is it made up of market sentiment and its perception of a certain product/brand, but it is also at the mercy of the macro cryptocurrency market.. Therefore, it is safe to assume that the assets will go down and are risky. Despite the risk, many NFT collectors continue to put their money where their convictions lie, either blindly or more strategically in the hope of getting a blue chip investment.
more than the price, volume history and brand value, time appears to be a major factor in determining whether an NFT has achieved blue-chip status. This suggests that the asset needs to be tracked over time rather than focusing on momentary performance to justify the current value of a project.
Investors in NFTs will have their opinions on what is considered a blue chip and it is important to reiterate how nascent the market is. A better evaluation process is to track total quarterly sales volume, buyer-seller ratios, and project roadmap or community developments as components of blue-chip status.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and operations involve risk, so you should do your own research when making a decision.