Investors are quick to label high-quality NFT collections as “blue chips,” but what are the criteria used to determine which project deserves this status?

“Irreplaceable Blue Chip Tokens (NFTs)” is a popular buzzword found on Twitter and various crypto media outlets. The term “blue chip” is borrowed from traditional finance, where stocks that are considered established extensions of companies are known for their quality, reliability, and financial stability. But what are NFT blue chips and how do you recognize them? ‘

Nansen Research analyst Louise Chow told Cointelegraph that since NFTs are in their infancy, “it’s sometimes difficult to apply these criteria because NFTs are still an evolving asset class.” The general consensus is that the coveted blue chip is the least volatile asset, meaning it will hold its value over time.

Let’s take a look at some factors that determine whether a given NFT project qualifies for blue chip status.

Volume is only one piece of the puzzle
Collectively, NFT investors, like any group of traders, look at the total sales volume and total market cap of the collection. When an NFT collection reaches or exceeds the desired level of 10 Ether (ETH) ($30,624), collectors generally consider it blue-chip status. Total sales is another data point that NFT traders look to as a gauge when determining if the market is healthy.

While high volumes are desirable, are they sustainable and reflect blue chip status? Nansen updates his blue-chip index every 90 days because he knows “the market is young and fickle.” As such, the NFT market is often contentious when a collection flies to the moon with no end in sight.

On April 16th, PROOF Collective launched its first Proof-of-Profile (PFP) Moonbirds collection. The project has literally skyrocketed, and total revenue on OpenSea has already surpassed $220.8 million. Although the project barely appeared on the list during the week, its explosive growth has led some NFT pundits to speculate about its potential value, with some believing it has already achieved blue-chip status.

Moonbirds all-time average. Selling Price/Quantity. Source: open sea
However, there are experts who disagree with the view that volume is an indicator of blue chip statistics. Some NFT investors argue that it’s difficult to use this data point as a measure of such an illiquid asset and that they feel the blue-chip NFT can hold its value in a bear market.

Other NFT enthusiasts seem to rely on influencers and big players in the field to determine which assets to line their pockets with.

Communities are more than the number of unique owners
It’s important to note that the status of blue chips isn’t just determined by numbers, but also by community sentiment and devotion. The trade can be repeated, but the community cannot. “Communities and thus network effects are certainly key factors for the success of the NFT project,” said Chou. Often the first metric to determine project acceptance is the number of unique owners. But even as a measurable metric, this isn’t the right option.

Recording the number of unique holders simply means that you are recording the number of wallets that have a specific asset. This being the case, an owner can own 1,000 assets and deposit each of them in their respective wallets, resulting in 1,000 unique owners, when in fact there is only one.

However, NFT investors often cite communities and the number of individual holders as a factor in why they consider NFTs to be of blue-chip caliber. Chow gives NFT blue-chip status and considers its community, stating that “…NFT projects aim to build an entire ecosystem that generates value, rather than focusing on a single benefit.”

Communities are more than just numbers as they represent people with different levels of faith and beliefs about the project and the ecosystem.

Part of the magic of Yuga Lab’s Bored Ape Yacht Club was that it was a self-governing community that did something they didn’t expect. BAYC has not only amassed a total volume of over US$1 billion, but also attracted global media attention in less than a year.

When the volume and number of unique holders becomes a static focus for what counts as blue chips, Moonbir becomes

Source: CoinTelegraph