There’s no denying that the markets are down. You might have heard the common advice to research and buy “blue chip crypto” during bear markets.
But what is a “blue chip crypto” and which should you look at?
Here’s a short introduction.
What are “Blue Chip” Cryptocurrencies?
In poker, blue chips have the highest value on the table. Taking the cue, a blue chip stock is a financially stable, valuable company with a strong business model.
This definition has seeped into the world of cryptocurrencies and the term “blue chip crypto” is commonly used to refer to the strongest cryptocurrencies. However, many would argue that the term “blue chip” isn’t relevant for the field of crypto because of the high volatility.
I mean, even Bitcoin is known to face huge drawdowns of >50% during bear markets:
So, here’s a disclaimer before we proceed. Although I’ll be sharing some blue chip cryptocurrencies in the next few sections, this isn’t financial advice. It’s your money, remember to do your own due diligence.
If you’re unsure where to start, AK shares his take at our cryptocurrency masterclass.
2 “Blue Chip” Cryptocurrencies
Bitcoin and Ethereum are often seen as the only blue chip cryptocurrencies because they are among the oldest and most well-known projects in the space. They have both been around for over five years, have large developer communities and user bases.
1. Bitcoin (BTC)
Bitcoin is the first cryptocurrency and has reigned as the cryptocurrency with the biggest market cap since its inception.
It is a digital asset and a payment system where transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain.
At the point of writing, Bitcoin is down 69% from its 2021 highs. And this was how it performed in past bear markets:
You can read our guide on Bitcoin to learn more. Or, you can also read Alvin’s thoughts:
2. Ethereum (ETH)
Ethereum is a decentralised platform that runs smart contracts and applications. It was proposed in late 2013 by Vitalik Buterin, has grown significantly over the years.
At the point of writing, Ethereum is down 77% from its 2021 highs. And this was how it performed in past bear markets:
BTC and ETH are usually the blue chip cryptos that investors look out for when the markets are down because they have successfully weathered through multiple down crypto cycles.
According to the Lindy Effect, they are likely to outlast the rest.
What is the “Lindy Effect”?
The Lindy Effect suggests that the future lifespan of something will be proportional to its current lifespan. This means that the longer something has been around, the longer it’ll remain in existence.
when something that has been around for a long time will continue to be around for a long time. This is because it has been proven to work and people like it.
3 Cryptocurrencies vying for “Blue Chip” status
There’s almost no debate to the recognition of Bitcoin and Ethereum as blue chip crypto.
However, there have been a few key crypto projects that are now vying for the “blue chip” status. Here’re three that I stole from our crypto masterclass trainers.
Before we proceed, crypto investor and trainer Aik Keong warns that:
“Blue chip status can be quite subjective in crypto, (with exception to Bitcoin and Ethereum) what used to be on the top 10 in 2017 are probably now further down by market cap…”
AK
1. Binance Coin (BNB)
Binance is the largest centralised cryptocurrency exchange by trading volume. And the Binance Coin (BNB) can be used to access lower trading fees on the Binance trading platform. It is one of the first few centralised exchange tokens to be launched.
Since its launch in 2017, the Binance ecosystem has grown tremendously functionality and use cases for BNB has been expanded over the years. It can now be used for transaction fees, payment for goods and services and more on the BNB Smart Chain.
Holders can choose to stake BNB on Binance and earn interest on new coins that will be listed on Binance. Your rate of return would be dependent on the performance of the new coin.
BNB has survived multiple crypto market cycles since 2017.
At the point of writing, BNB is down 69% from its 2021 highs. And this was how it performed in past bear markets:
2. Chainlink (LINK)
Smart contracts allow automated programs or events to take place on the blockchain when certain pre-determined conditions are met. But what if those conditions take place off the blockchain?
Who can you trust to ensure that the conditions are being met?
That’s the problem that Chainlink aims to solve.
Through the use of oracles, Chainlink allows blockchains to interact with external data feed or events securely. They have since partnered with companies like Google, AccuWeather, FedEx, Flight Stats and many other companies for data verification.
LINK is the token used to pay for services on the Chainlink network. There’re also plans to implement staking, in order to improve security and economics of the ecosystem.
LINK was launched in an Initial Coin Offering (ICO) in 2017 and likewise has weathered multiple crypto cycles.
At the point of writing, LINK is down 88% from its 2021 highs. And this was how it performed in past bear markets:
3. Zcash (ZEC)
The best part of blockchains is its transparency. Anyone can see all the transactions that has taken place and trace each transaction to the wallets involved. But with that comes the worry that sensitive information can be obtained, and in the wrong hands the outcome may not be ideal.
Zcash was created as a privacy (and anonymity) first solution. It uses zero-knowledge proof technology to verify legit transactions, while protecting sensitive information and keeping the involved parties anonymous.
With Zcash, users can decide if their transactions are shielded or transparent. (Don’t worry, there’s a backup option to retrieve these information for audits or regulatory purposes. But that’s a lengthy topic for another day.) The ZEC token is used to pay for transactions on the Zcash network.
ZEC was initially based off Bitcoin’s sourcecode and was launched in 2016 and has survived since. Here’s how it had performed since last 2017:
Will you be keeping an eye out for blue chip cryptos this season?
Since Bitcoin was first introduced in 2009, the cryptocurrency markets have undergone several cycles…and recovered stronger.
Although we don’t know how long the current down markets will last, we think that like the stock markets, it’ll recover in due time. And in the meantime, it might be a good idea to pick up blue chip cryptos at a discount.
That being said, not all cryptos are created equal and some will hold up better in bear markets than others.
And remember, crypto is a high risk asset so do your own due diligence! If you’re not sure where to start, join AK at his upcoming live webinar to learn how he approaches the current crypto markets.