Every NFT is unique and has characteristics that make it rare or sought after. These characteristics also make determining the precise value of an NFT problematic.
While tangible assets like artworks and physical collections such as playing cards have established prices, collectors and investors intending to purchase NFTs may struggle to determine whether an NFT is worth their money. This is when NFT metrics such as floor pricing come into play.
This post will teach you everything you need to know about the NFT floor price.
What Is An NFT Floor Price?
The NFT floor price is the most you can spend to purchase an NFT from a specific project or collection.
While it seems obvious that the floor price is simply the lowest price in the collection, this value can affect a few things.
Many NFT specialists believe that the NFT floor pricing impacts the overall value of the project. If they notice the floor price lowering, most inexperienced owners will panic and sell their NFTs. However, the truth is somewhere in the middle.
How to calculate NFT floor price?
The floor price is decided during the minting process by the original author and afterwards by the owners of the NFT on the secondary markets.
On platforms like OpenSea, you can see the floor price for any NFT project, which is essentially the asking price of the NFT owner who is selling their NFT for less money than other owners in the collection.
When the NFT is minted, the inventor determines the floor price. The floor price in the secondary market is established by the NFT owners, and it is not always the best indication of the project value.
Sometimes there are unintentional lower prices or floor price manipulations. This suggests that something is happening with the project. Therefore, you need to evaluate other characteristics, such as rarity and utility, before making any transactions or purchasing an NFT.
What determines the NFT floor price?
Because the floor price is set by the NFT owners, there can be significant volatility and large changes, even for less popular NFTs. Given that humans are behind the set price, it is prone to errors and influenced by a variety of circumstances, including:
The floor price rises in tandem with the popularity and demand for a certain NFT project. The well-known BAYC presently has a floor price of 73.7 ETH and is usually in strong demand. The greater the prices, the more popular the project, and vice versa.
NFTs have progressed from simple doodles and profile picture art to the community’s demand for further utilities. This also implies that the higher the floor price, the more utilities one NFT project possesses. It’s easy to see why NFTs with benefits are more valuable than those with no utilities at all.
Many of the NFT projects on the market are the work of well-known and respectable artists and creators. As a result, the reputation of the NFT creator can also influence the average and floor price. Owners of popular NFTs do not willing to sell their collectibles for a low price.
NFT communities and social networks have a significant impact on the final price of NFTs. Particularly the floor pricing. If the NFT project has a lot of internet support, active social media channels, and Discord, the price will most likely reflect that.
The endorsement of celebrities and influencers has a significant impact on the floor price. If a celebrity buys an NFT from the collection and donates to the cause, the value immediately rises and the floor price rises.
How to avoid floor price manipulation?
Although purchasing the NFT at the floor price may be a good first move for new participants in an NFT project, the floor price is subject to manipulation.
Newly launched NFT ventures with strong potential are frequently aggressively purchased by an individual or group to artificially inflate demand. Similar to how scalpers buy event tickets and then resale them at a higher price, after the sweep, the buyers can sell these recently acquired NFTs at a higher floor price.
Be cautious of projects where the NFTs have been “swept” that lack large communities. In situations like that, the project may have set up a sweep to increase the floor price and total worth of the collection.
Always analyze the transaction history of the NFT you wish to purchase and DYOR to estimate the project’s long-term value to prevent falling into floor prices manipulated by a sweep. Join their Discord and Telegram groups; see if their communities are authentic, such as their social media following, to aid in NFT investment decision-making.
How to determine the value of NFT projects by using their floor price?
One of the elements to examine is the NFT floor pricing. Particularly when judging the worth of an NFT or a whole project. Because the floor price may be manipulated and adjusted, you must rely on other features of the NFT, such as rarity and utility.
Here are some ideas on how the floor price can affect the project’s worth. IT will undoubtedly assist you in making the best investment decisions:
The floor pricing of any NFT project is always changing; however, the adjustments are usually little and not too important. The floor price might be the real-time value when the project is steady, has a strong reputation, and there are no rapid changes in the market.
You can manually monitor the floor price of intriguing NFT projects or use one of the tracking tools and charts available, such as icy.tools or niftyprice.io.
Increasing floor price
Increasing floor pricing may appear to be a good thing. It shows that the NFT project is gaining momentum. It is not, however, always the ideal excuse to make impulse purchases. When prices rise naturally as a result of the NFT project’s great quality, a strong road map, and an engaged community, it’s safe to claim the floor price is reasonable.
Certain developments’ floor prices are often unnecessarily inflated. They do this to make it appear as if there is a lot of demand.
Thus, you should conduct an additional investigation before falling for the hype. Join their Discord channel to learn more and to see what all the excitement is about. Don’t let your enthusiasm get the better of you, and always make sure you’re purchasing digital assets for the appropriate reasons.
Decreasing floor price
If the floor price is lowering, you can get very concerned if you are a supporter of NFT initiatives or merely have a few tokens in your collection. However, this is not necessarily a reliable sign that you should sell your NFT and instead exercise caution in the market.
Indeed, if you are new to the NFT world, the price changes might be frightening. Remember that the cryptocurrency market has always been unstable and changeable.
Therefore, the NFT project is not a failure only because the floor price is declining. Be sure to connect with the project’s developers and the surrounding community. Before making any snap decisions, find out what is happening.
The value of NFTs is mostly determined by market forces, and it is impossible to predict the future of the NFT space with accuracy. However, you can improve your chances of success by using measures such as floor pricing and conducting thorough research to inform your purchasing approach.
The floor price is the collection’s lowest selling price for the NFT. It might be a good predictor of the project’s success and worth. Always bear in mind that there are numerous additional factors to consider before making a purchase.