Blue Chip Crypto Investment - How To Do It Right

12 Jun 2024

In equity investment, a blue chip is a stock that will last for decades and pays consistent yearly dividends. Think Microsoft, Apple, Proctor & Gamble, Coca-Cola, McDonald's, Johnson and Johnson, etc. Practically too big to fail and very reliable. If they take a price hit, they will bounce back.

Many modern investors have moved on from equity towards crypto, which offers better returns and alternative investment opportunities. Some cryptocurrency tokens can now be considered blue chips, having huge user bases and trade volume, as well as server decentralization and large feature sets.

Crypto Blue Chip Examples

Examples of blue chip cryptos would clearly include Bitcoin and Ethereum, the two highest coins by trade volume. Even if high volatility ensues, they will always bounce back, and have a history of doing so. As long as investors can stomach the volatility (and the gas fees, in Ethereum’s case), these are safe coins.

Another example here would include Binance (BNB). The multi-billion dollar trading exchange has many features and protocols meaning it’s not going under anytime soon. Even with a huge $4.3B SEC fine, the price did not suffer unduly. In fact, it is doing extremely well.

Solana (SOL) is another blue-chip contender. Many people expected it to disappear after its involvement with FTX and it has a history of network congestion. Yet it ended up being one of the best-performing coins of 2023.

Identifying blue-chip cryptos is a relatively straightforward process, and you can use things like trade volume, active users, and market cap. However, maximizing ROI is entirely different and takes more skill and knowledge.

Crypto Blue Chip Investment Tips

Investment principles hold true across asset classes. The first step is to identify a market low and make an entry there. At the time of writing, SOL is priced at about $150 and ETH is priced at around $3,500. But we are likely to get better investment opportunities this year. Even if ETH could hit $10,000 in 2025, it’s better to wait for the lowest possible entry point.

What could often happen in this scenario is that an investor enters ETH at $3,500, the price drops to $2,500, the investor sells, and the price subsequently rises beyond $5,000. Without having an appropriate time frame, emotional investment sets in. Taking small profits when the price rises is also a great defensive technique.

The crypto equivalent of dividends would loosely correlate to Proof of Stake (PoS) rewards. These are fairly high interest rates for staking coins. SOL, for instance, offers a steady 7% on tokens and has done for years. Polkadot (DOT) offers up to 15%. Airdrops should also be considered as a form of free tokens.

Forking is also another great though unpredictable means of increasing profits. Bitcoin forked into Bitcoin Cash, Bitcoin SV, and Bitcoin Gold. While there is no such thing as free money, holders of Bitcoins benefited from additional coins and sold them on the market. Ethereum also forked into Ethereum Classic.

Additional Insights For Profit Maximization

Diversification is also required for successful blue chip investment. In crypto, you can diversify across industries such as privacy-based coins, exchange coins, AI coins, meme coins, L1s, L2s, etc. This is an effective way to diversify holdings, though you can also diversify across asset type. In traditional investment, keep in mind that 20 stocks need to be held before a portfolio is considered diversified.

One of the most important yet under-reported elements of the currency crypto economy is that coins are not correlated strongly to Bitcoin anymore. They do tend to go up and down with the price of BTC, but nowhere near what it was like pre-2024. This means there are more outliers. If Bitcoin goes up 10%, another coin might rise by 50%. Sector rotation is in play.

Another extremely important point to reiterate is that the media is majorly biased toward price increases in crypto. 10x returns are very hard to obtain, never mind 100x. The irony is that insiders might get these returns. The media then remarks on how 100x returns were obtained. But these are the people you will be competing against unless you are an insider to a project!

You’ll also be competing against HFTs, bots, analysts, quants, and trading fees. A better bet is to consider assessments per industry segment. For instance, crypto financial institutions predict Bitcoin above $200,000 in 2025 while most experts and traders estimate between $100,000 - $125,000. This can give you a better market view and with patience, you can extract a good ROI.

Blue Chip Takeaway

Buying crypto blue chips is more straightforward than one might believe. Buy low, sell high, and just be prepared to hold coins for longer time horizons. Consider that you will probably have to hold coins for 1 - 2 years in many instances to gain significant returns, and you’ll still face high volatility.

While returns can be observed in the short term, this should be seen as a bonus and not something to expect. Otherwise, you will be disappointed. The cryptocurrency market offers unparalleled opportunities, but you still need to be extremely patient, disciplined, and observant to reap the rewards.

There has never been a better time to make profits in the market.