In the traditional stock world a “blue chip” refers to a company that’s considered a reliable investment. In the NFT market, traders and speculators are eager to determine which projects will be the future blue chips of the NFT industry.
Since the NFT market cooled off considerably in mid-2022 we figured it was time to give this article an update.
- The NFT market exploded in 2021, and with that explosion, a few projects skyrocketed in value from their mint price, such as Cryptopunks and BAYC. Market watchers have begun calling these projects "blue chip NFTs" with the belief they will retain high valuations for a long time to come.
- Even in the “bear market” these projects have maintained high values, although they aren’t immune swings in the overall market.
- Given the nascent nature of the NFT industry, only a few NFTs are considered "blue chips" among the now 1000s of projects available on the market.
- With so many new projects being launched, particularly during the 2021 bull run, the market is only speculating on which projects will become the next tier of blue chips.
- Factors that that the market values when making the "blue chip NFT" pronouncement include the art, the artists, the developers, the utility, the project’s floor price & sale’s volume, celebrity endorsements, and the project’s community.
What does Blue Chip mean in Traditional Finance?
Blue chip stocks are investments that are considered safe, long-term bets that generate steady returns on the invested principal.
Typically, blue chip companies have been around for many years, are well-capitalized, and have a long track record of success. Companies like Coca Cola, IBM, Disney, and General Motors are considered the “blue chips” of traditional finance (TradFi).
Investing in a blue chip is not considered highly risky, versus a more speculative bet like a penny stock or an early stage company.
The original etymology of the term goes back to the classic 3-color poker chip set where the blue chips hold the highest value.
Back in the 1920s when the term was first used, stocks that were trading at over $200 were the blue chips of the day.
We want to explain the origin of the term because the use of “blue chip” in the NFT market is quite different.
What does Blue Chip Mean in the NFT world?
In TradFi, blue chips are all about longevity, but that simply doesn’t exist in NFTs.
At least, not yet.
CryptoPunks are the OG NFT project and they’ve only been around since 2017.
Related: Learn more about the history of NFTs
The next most successful NFT project to date, Bored Ape Yacht Club (BAYC), has only been around since April 2021.
So when the term blue chip NFT is tossed around, what is it that people actually mean?
Generally, when people use the term blue chip NFT, they mean that the project will retain a high value well into the future. In other words, it will behave like a traditional blue chip stock in the future.
Since thousands of projects have launched since the Spring 2021 NFT explosion, and more every day, it’s impossible to keep track of them all.
Back during the 2021 market, project discords were alive with holders and enthusiasts claiming each and every sold out project was on a rocket ship to the moon and would become the next to be widely accepted as a bluechip project.
Now that the market has taken a downturn and NFT sales have dropped off significantly these discords have become more like digital ghost towns.
The market has enjoyed a prolonged state of euphoria at the top and most investors weren’t prepared to come back down to Earth. Tons of projects launched, especially in the PFP space, that now even active NFT market-watchers wouldn’t remember.
It doesn’t take a genius to tell you that the market was heavily overbought and is more susceptible to getting caught up in the hype than a six-year-old on a sugar bender.
All markets have winners and losers and watching this market organize in its still-early stages has been a fascinating experiment to witness in real time, but from where we stand today it’s obvious that we have a long way to go.
So in order for the term “bluechip” to have any meaning, only a small percentage of projects should be able to claim the title if it’s meant to have any value in the long run.
So how can you know whether or not a project will be a blue chip?
What Makes a Blue Chip NFT?
If you are looking for an absolute answer, you’ve come to the wrong place.
NFTs are awesome, but they’re also incredibly risky, and it’s impossible to predict how they’ll fare as an asset class over the next decade and beyond.
People are spending countless hours researching projects, buying and selling on marketplaces like OpenSea and Rarible and getting into heated Twitter debates over whether or not a Pudgy Penguin will outperform a Lazy Lion. (Disclaimer: We have no idea.)
Everyone is looking to beat the market and make an NFT bet that will allow them to retire to a Metaverse beach before 2025.
We’re now entering the era of amateur NFT fundamental analysis.
Hopefully, in a few years the market will still be going strong and we’ll be able to see who’s investing theses were correct and moved the field of NFT analysis forward.
But for now, we have to settle for looking at what factors the market is consistently valuing when making a “blue chip” pronouncement.
These factors are:
- The Art
- The Artist & The Brand
- The Developers & The Utility
- The Floor Price & The Sales Volume
- Celebrity Endorsements
- The Community
The Making of a Blue Chip NFT: Factors the Market Favors
Factor #1: The Art
The first factor is the art itself. Art comes in a myriad of styles, forms, mediums, scholars have debated for centuries “what even is art?”
We will not debate "what is art?" here, but just know it’s subjective and there will be some art you will like more than other art. It’s a good rule of thumb to collect art you enjoy independent of any value calculations. If you are unsure of your taste in art, look to what other types of media you enjoy from music to movies, games, or TV.
Ask yourself what you like about those particular pieces of culture and see if you can find art that makes you feel the same way.
Over time, you will hopefully develop your own taste and can collect art you enjoy with confidence.
That’s all on a personal level, but markets are made up of individuals all acting in concert. This is why we see trends in all forms of media from TV to movies, music, games, etc. NFTs are no exception and successful projects are immediately copied in either style or structure.
So back to the matter in question: what makes “blue chip” NFT art?
We can look to the projects that are already well on their way to blue chip status: CryptoPunks and Bored Ape Yacht Club.
Since CryptoPunks became popular there have been countless punk derivative projects.
You can consider these knockoffs or infringements on the IP but the idea of a punk became valuable and then others hopped onto the trend. (The IP issues surrounding CryptoPunks is a whole other story.)
When Punks first launched, no one cared. They were giving them away for free.
This is the equivalent to seeing your favorite musician in a small theater years before they blew up.
People collected Punks because they thought they were cool and liked the art.
Since then the pixel art style of Punks has taken over the NFT scene and pixel art projects are prominent in the space.
The vector style of BAYC has been replicated in the Lazy Lions, Hall Of Fame Goat Lodge, and many others.
The projects mentioned here are all valuable and are being considered blue chips already, part of that calculation is based on how the market feels about their underlying art.
To take a different angle, let’s consider some abstract generative art like Tyler Hobb’s Fidenza collection.
Each piece is an abstract work using the same elements. The floor price on a Fidenza is 70 ETH at the time of this writing
August 2022 Update:
The floor price of a Fidenza in July 2022 was 100 ETH - but $ETH is ~$1,500 versus ~$4,400. Even though the collection has lost significantly in total value it’s still faring much greater than many other collections which is giving holders confidence through this bear cycle.
Fidenzas are already considered not only a blue chip NFT, but a luxury blue chip NFT. This is largely in part to an appreciation of the art, but also the artist.
We’ll discuss the artists more in the next section, but if you look at Fidenzas you can easily imagine these pieces displayed in a physical gallery alongside a hefty price tag.
The way the traditional art market values art aesthetically can definitely play a factor in the NFT space.
But the art itself is just our starting point.
Let’s discuss the role of the artists.
Factor #2: The Artist
Artists that have significant social capital before entering into NFTs are that much more likely to have a project that’s considered valuable by the community.
Other examples would be popular street artist Ron English who recently launched his own project The LightCultCryptoClub and Bobby Hundreds who launched Adam Bomb Squad back in August 2021 after running The Hundreds streetwear brand for the past 18 years.
Initially I was going to include the artist along with the art, but then I realized it’s actually it’s own factor.
Artists do a ton for the value of their projects independent of the art they create.
They act as the de facto representative and personality of their brand.
They are the standard bearer for that project and typically who you follow for major announcements about what’s coming next in terms of utility, airdrops, and IRL events.
Artists also potentially come with a history and track record of success outside of NFTs and that can translate into a successful project.
GaryVee built a tremendous social media empire for the decade before he got into NFTs and that has translated into a high valuation for his project VeeFriends.
VeeFriends is a unique project and scores well in many of the categories below, but one notable point to mention is that Gary never considered himself an “artist” before launching his NFT project.
What's interesting about the NFT space is that it’s bringing new artistic voices to the forefront of our culture.
These three projects have extremely active artists who along with the rest of the core team are the voice of the brand. Without their involvement the product probably would lose significant value.
As the space progresses there’s no telling how these artists will grow and develop beyond their PFP projects. Maybe they will spin off to create other types of NFTs or other media entirely.
Factor #3 and #4: The Developers & The Utility
After the artist, the devs are the most important players on the team. (Possibly the most important depending who you ask.) The dev team is responsible for coding the smart contract and coding in the initial into utility to the NFT.
This is why we are discussing both factors in the same section.
The skill and track record of the devs are crucial to assessing their value.
The devs remaining active on a project after launch means they’re staying involved with future releases and you can expect the same quality in terms of the coding.
The devs are core to utility, both the initial and the ongoing utility.
The utility of an NFT answers the key question of “Ok, but what can this NFT do for me?”
Utility has become one of the hottest topics of conversation in the NFT space and going over all the different types of utility projects are offering can be its own series of posts.
But we can review some of the major forms of utility projects are offering.
August 2022 Update:
Now that we’re in a bear market project utility is really being put to the test. Potential investors are asking “what will buying this NFT really do for me” a lot more and the days of “apeing” into project without doing due diligence appear to be over.
Yield Tokens - Many projects are offering a token that will be airdropped to users who hold their NFTs over the long term. Earning a yield token may or may not require that the holder stake their NFT in a liquidity pool.
Token-Gated Merch - As projects increasingly see themselves as brands, it’s become popular to release exclusive merch to holders of their NFTs. This is a great way to rep the brand and create some awareness in the world. Although NFTs are still largely unknown, if you're wearing your BAYC or Cool Cat hoodie to an NFT event, it won’t go unnoticed.
Another NFT - Dropping a subsequent NFT to holders is one of the most common forms of utility projects will offer. This gives the original holders a leg up on the collectors coming into the project after them and provides them with an NFT they can sell for liquidity if needed. Everyone loves a 2 for 1 deal.
Collab NFT - One specific way to offer a 2nd NFT is to turn it into a collab with another project. Collaborations between projects are a solid cross-promotional strategy to bring two communities together.
A Game - Games have become hot in the metaverse. PFP NFTs are nice, but you can’t do much with them besides displaying them and well, that’s about it.
However, if a project offers a game where the NFT will have some additional value, aka utility, then this utility gives the holder a lot more reason to stay in the project.
IRL (In Real Life) Events - At NFT.NYC the BAYC threw a couple massive parties that were exclusive to Ape holders. These parties (so I’m told) featured celebrities like Chris Rock and bands like the Strokes all for free to the community.
Access on that level usually costs you upwards of $500 if not more for entertainment of that caliber. These events also bring the community closer together, but we’ll touch more on that in the community section below.
A Whole Lot More
What types of utility a project can offer and what holder will truly value over time remains to be seen.
To bring GaryVee back into the conversation, utility is actually the most important aspect of his project and I don’t know if any project has mapped out specific utility to different NFTs as well as he has.
One major piece of the utility of VeeFriends is that the NFTs act as a ticket to attend 3 years of VeeCon, a conference he’s launching just for holders.
Assuming Gary can pull this off, and he does have a solid track record for execution, then the VeeFriend NFTs have baked in value from 2022 to 2024 and likely beyond.
Most start-up projects don’t have these connections or resources at their disposal but it will be interesting to see if the multi-year utility model and some of Gary’s other ideas make their way into other roadmaps.
When it comes to blue chip considerations, utility is absolutely key.
August 2022 Update:
Now that we’re in a smaller, more frugal, and wiser NFT market. Utility is a greater topic of conversation than ever before but since many of the speculators have left the market (for now) the focus is on building and truly executing on the promise of the tech.
We’re wondering what NFTs can really do to improve our lives as holders, what teams can deliver and at what interval to make the investment in the asset worthwhile.
This all takes time and trial and error and patience on the part of holders.
The era of rapid launch that crank valuations is over for now. What we’re seeing now is projects who are doing the work to fulfill their roadmap promises, giving regular updates and showing progress bit by bit.
This is where the real work is done and the projects that were just slow rugs to begin with probably have stopped updating their community and gone by the wayside.
Factor #5: The Floor Price & Sales Volume
The Floor Price
This one is fairly self explanatory. The higher a projects floor to buy-in, the more valuable it is.
Floor pricing does range as the overall market moves but projects that have a steadily increasing floor are growing in value.
A floor price of 1 ETH for new projects is being used as a benchmark to determine its blue chip trajectory.
The speed at which a project hits the 1 ETH floor mark is particularly relevant to this demarcation. We’d recommend some caution here when judging a project as the NFT scene is subject to pump and dumps.
1 ETH today may be a rug tomorrow.
Projects like CryptoPunks and BAYC have become blue chips in some respects due to floor price alone.
The Crypto and NFT space is all about exponential growth and massive gains (or horrific losses). For these successful projects when they hit a benchmark price like 5ETH or 10ETH it’s seen as an indicator that they’ll continue to 2x, 5x, 10x or more.
Holders see this price action and raise their own floor prices accordingly, soon it leads to a network effect and the entire community is lifting up the floor.
Now the floor price is only relevant as long as there is sales volume. Anyone can set whatever price they want on an NFT, but if no one’s willing to buy it then it’s just going to sit out there in the market.
Sales Volume is what validates a floor price.
As floor prices rise the total number of transactions will decrease as weaker hands are shaken out of the market but the total dollar amount transacted in each sale will increase as floors rise.
If the market is buying and selling the NFT consistently at increasingly higher prices than that NFT is growing in value. The more valuable the more the case of blue chip status is confirmed.
August 2022 Update:
In the current bear market, sales volume is way down for many collections compared to the height of the 2021 bull. I wouldn’t necessarily equate low sales volume to a loss of “blue chip” status. Most collections (and holders) have taken a haircut and that hurts market wide.
There are probably a portion of holders who are looking to sell to earn back some liquidity, or plan to buy back in when they believe the market has reached its bottom. What’s important now is to look at the collection's floor price today versus its height during the bull run and compare it to other collections. See my example above regarding Fidenza’s.
Factor #6: Celebrity Endorsements
Ahh yes, celebrities, the only people that seem to matter. Just kidding of course. (Sorta.) But who doesn’t love the endorsement of an awesome celebrity like Snoop Dogg repping Sandbox or Steph Curry promoting Rumble Kong League.
Celebrities bring clout and cache to this space and can make or break a project early on.
Of course, Do your own research (DYOR) and judge whether or not the celebrity is truly invested in the project’s success or is simply in it to make some quick cash of their own.
Recently the crypto on-ramp start up MoonPay sponsored the purchase of a few Bored Apes for celebs like Post Malone and Jimmy Fallon. The Late Night Host even had Beeple on his show as part of the promotion.
Jimmy proudly displayed his BAYC as his Twitter PFP for about a week before switching back to his non-NFT avatar.
So is he really interested in NFTs or was simply following contractual obligations? Only time will tell, but there are plenty of celebrities from actors to athletes and musicians who are genuinely interested in the space.
Reese Witherspoon is one example. Reese publicly announced her interest in crypto earlier this year and has been supporting projects, particularly women-centric projects, in the space ever since.
As more celebrities jump into NFTs and end up supporting projects that end up fizzling out then the value of celebrity endorsements in general may go down.
Celebrity backing alone shouldn’t be what makes or breaks a project but for time immemorial having notable figures attached to a product or service has always been a solid marketing technique.
My contention is that as the space becomes more sophisticated celebrities will also be forced to become more thoughtful about what projects they are lending their status to.
August 2022 Update:
My thesis is looking good so far. New celebrity entrants are making less headlines in the crypto space, meanwhile the celebs who are truly passionate about what’s being built here are gaining increasingly credibility. While new celebs are entering the space regularly, including acting legends Bill Murray and Jim Carrey, it’s not making much of a splash.
Snoop Dogg has become one of the leaders of celebrities in Web3 and he’s been actively championing NFTs non-stop since he entered the space. He premiered his Bored Ape music video alongside Emimem at ApeFest and was a highlight of NFT week. He’s been making significant investments in large projects and has vowed to turn Death Row Records into a Metaverse-first label.
Paris Hilton has also remained active in the space and continues to innovate with her projects and investments.
Meanwhile we haven’t heard much from people like Jimmy Fallon since he purchased his Bored Ape last year.
It's very early in terms of mainstream adoption but there appears to be a real division now between celebrities who are active in the space and those who are just dipping a toe in the water.
Factor #7: The Community
Last, but certainly not least is the community.
The communities being built around projects like BAYC, Cool Cats, Doodles, and Creature World are impressive. They show the strength of the underlying NFT and how excited the holders are about the project's long-term prospects.
Communities also are a form of utility themselves as members have unique access to the rest of the community. Humans have always bonded over shared affinities like college alma maters, sports teams, and ethnic backgrounds.
NFT communities are becoming a new way for people to connect with others they normally may not have a connection to, and it's pretty cool to see what communities are creating to support their projects.
People tend to congregate where there is real value so the strength of a community will have to be judged over time like many other factors we’ve discussed.
Communities are built one connection at a time and people are typically buying into a project for one of the reasons listed above.
One reason we’ll add here is joining because of a pre-existing connection. NFTs are more fun with your friends and since we’re all learning and sharing knowledge it makes sense groups of friends will buy into a project together.
From a community standpoint this is a positive since it tightens the bonds among the membership when there’s a pre-existing friendship.
Investing with friends has become a trend in crypto and tradfi too as we want all our friends to make it to the top with. #WAGMI
It’s also cool to make new friends in NFT communities that can then spill over into real life. You can bet when two members of the Gutter Cat Gang spot each other in real life they’re going to chop it up.
It’s no different than finding another fan of the same sports team you root for when in a foreign city. These communities are so small right now that there’s an instant bond between people who are part of the same club.
August 2022 Update:
Communities continue to remain a driving factor in the space. There certainly are project’s whose communities have dried up, but the NFT community at large remains strong. Now is a time for more collaboration between builders and those who are deeply immersed in the space.
The communities that were simply built on a project’s floor price seeing hockey stick growth have fallen apart and those projects are unlikely to ever vault into the realm of the blue chips.
What’s cool is seeing communities build together and actively help improve upon what the project founders are creating. Seeing the Gutter Cat Gang cheer on their team in the TBT (a basketball tournament) shows just a taste of what’s coming when NFT communities go mainstream.
Bonus Factor: Long-Term Performance
I wanted to add a new factor of “Performance.” As time goes on it’ll get easier to track a project’s performance over different time intervals.
The market is still extraordinarily young and we’ve barely made it through one complete fiscal year since BAYC launched and opened up the floodgates on the PFP market.
Given more time it’ll become easy to look at benchmarks and year over year growth.
We’re also able to begin tracking auxiliary metrics like investment raises and revenue from non-NFT sales, significant headlines, and key hires to projects and brands that are looking to earn or maintain bluechip status in the space.
NFT.NYC this summer illustrated to me how the space is growing and changing IRL. Projects that didn’t exist last fall were throwing massive parties, bluechip projects like Apes, Doodles, and CoolCats threw concerts and created interactive experiences.
Given the nature of the event and all the satellite parties it was impossible to cover everything going on, but the vibe in the community was strong. No one was discussing floor prices and the conversations were focused on connection and the future of the space.
As time goes on we’ll be able to evaluate brands in the NFT market just like we do traditional stocks. Although though there’s plenty of financial metrics available and advanced tracking tools covering the NFT market, I don’t think even a year’s worth of historical data is enough to make confident prognostications about a project’s future.
When I think about performance it’s a combination of financial data, fulfillment of roadmap promises, and how the project is received by the market on a quarterly basis.
In this piece, I mostly only focused on PFP projects and just considered some of the most popular ones. Those are the ones that are widely considered blue chips already, but there are others, especially in categories like 1/1 art and photography. Then there’s the rest of the market and the projects that are seriously debated over “blue chip status.”
In short, I left a lot out.
Maybe I’ll come back with a much deeper survey on the subject in another few months to set the record straight. (Update: Still working on this.)
To return to my original thesis (or lack thereof) that the space is so young that truly conferring “blue chip” moniker to any project is premature.
But the idea that blue chips will emerge in this market appears correct.
Investors desire to find a future blue chip as early as possible is a valid investment goal. What makes it difficult is the overall lack of data we’ve been able to accumulate again due to our collective time in the market.
I know these factors (among others) will be key to separating the blue chips from the projects that don’t make it. #NGMI
Here’s where I want to leave off:
Is there a middle ground and what does that look like? Can you have a project that’s not a blue chip but also isn’t worthless?
Based on the law of averages that’s probably most projects we’re all involved in now.
Will we be able to live with our bags if they don’t pump to the moon but still offer us a nice return?
I am becoming more confident that this is true and my theory is that a healthy middle-tier of projects will develop that offer tons of value to their holders but do so with much smaller market caps than projects like BAYC and Doodles.
There is a ton of energy still in the space even though the headlines are a bit less flashy during this bear. I see the building that’s going on and how new segments of the population are getting ready to give NFTs a try.
I still believe it’s incredibly early, and now is a great time to begin your journey into NFTs.
Blue Chip NFT Chart
We put together a non-definitive chart of projects we believe fall into the following categories: Accepted Blue Chips; Likely Blue Chips; and Blue Chip Potential. See the Blue Chip Projects Chart Here.