Thread by @ModestusOkoye

Most of us here are aware of portfolio allocation in crypto which is an investment strategy done to balance risks/rewards.

In crypto, a typical portfolio should have

A.Stable coins
B. Bluechips
C. Medium Risk coins
D. High-Risk coins.

WHAT ARE BLUE CHIPS?

A THREAD 🧵

In traditional Finance, Blue Chips can be seen as companies that have performed highly over an extended period.

Note that two things are very important here;

1. Performance
2. Timeframe.

With these metrics, such a company can gain or lose investors.

In the cryptocurrency industry, blue chips are projects that over the years have passed through so many downturns, and bear markets but have been productive.

For an investor, this implies that investing in this project will have high yield over the years.

The hard truth is this: if you're a newbie reading this and you have been investing blindly for some time now, it's not all your coins in a loss that will recover when the next bull cycle comes.

And this is the reason I am sharing this knowledge for you to examine your portfolio

There are some criteria you look into before classifying a coin as a blue chip.

I will list and explain how I apply these criteria myself. They are;

1. Market Capitalization (MCAP)
2. Stability vs Volatility
3. Utility
4. Time Factor
5. Position based on MCAP

Market Capitalization: This is the value of a coin in the eyes of the people.

For a blue chip, it's at least expected that its market capitalisation is in billions of US dollars.

This means that many people have trusted the project and are willing to stake their money in it

However, these metrics don't work in isolation, you need to combine them to make a profitable decision.

Stability Vs Volatility
Stability is the degree to which the price of a project remains the same while volatility is the rate at which the price changes.

For a blue chip, we expect it to be almost stable in price, with a little volatility.

However, the cryptocurrency market is still in the adoption stage, so it's rare to see a coin that is almost stable.

For example, BTC after its bull run of 2020/2021, we have seen up to

45% decrease.

Since BTC is the father of all cryptocurrencies, we will have to use its stability as a reference when looking for a blue chip.

So we will be looking for coins that have done from 30-50% decrease from the bull run as our reference.

Utility
I am laying much emphasis here because no one will put money into a project without a plan for a long time.

You can milk them for the short-term, but long term trust demands a good use case.

Time Factor
Experience is the best teacher, if a project must be called a blue chip, you must have passed a test of time.

Now for cryptocurrencies that deal with bullish and bearish markets, that coin is expected to have tasted these two markets.

In essence, if a project have existed for 3 years and in that three years, it's only bullish market it has passed through, I won't regard it as a blue chip and vice versa.

Position Based On MCAP
I will always look at the first 20 token rankings based on market capitalisation to

choose a blue chip. Don't stick to this, it's my own belief. Some people stick to the first 10, and some stick to the first 100( though I won't recommend this).

So these are the metrics I look out for in my portfolio before reallocation.

For a case study, we will use #SOL

Currently, @solana is a blue chip based on the metrics we have put out here

MCAP= Over 32billion (circled in green)

Stability Vs Volatility: Solana has done -62.4% from its all-time high.

From our metrics, this is something we don't want but keep in mind that cryptocurrency is moving to adoption, so this alone shouldn't discourage you.

Utility: Solana as a blockchain enables transactions to be completed fast. So it's solving the problems existing blockchains had.

Time Factor: Solana has existed through a bullish and bearish season.

Created in 2017, passed through the bearish and bullish seasons.

Position Based On MCAP: Solana is
ranking 6th.

So, from our case study, Solana has four metrics out of five which qualified it as a blue-chip.

Some other blue-chips you can look into are;

$BTC
$BNB
$ETH
$LUNA
$DOT
$AVAX

Hey did you enjoy this thread, if you did, do well to retweet.

Are you are a newbie or a genius, there are some people who you need to follow too to gain more free knowledge.

They are;
@DeFi_educator @thedefiedge @TheEwansEffect @VirtualKenji @Willbrandblock @InvestorNnKay

@Route2FI @SamuelXeus @thedefiprincess

This is to mention but a few.