At this point, you already have an idea as to what NFTs are. You have already been told about the NFT floor price. Unlike tangible assets like traditional artworks and physical playing cards whose worth can be easily identified through defined values, NFT enthusiasts who are looking to buy NFTs typically have a hard time identifying an NFT’s worth. This is where the need for NFT metrics such as NFT floor price comes into play.
What is NFT Floor Price
Simply put, the NFT floor price is the minimum amount you will have to spend to own an NFT in a certain collection or project. It also represents the lowest value of an NFT in the market. The floor price is set by an individual who owns the NFT and lists the NFT for sale at a cheaper price compared to other sellers within that given project.
For example, Bored Ape Yacht Club, one of the most popular NFT projects today has a floor price of 93.39 Ethereum (ETH) as of writing. To participate in this project, one can do so for 93.39 ETH, the cheapest option if you can get to own an NFT in this collection.
To earn bigger profits, NFT holders list their NFTs at a higher floor price on the secondary market than what they have minted it for.
Different Types of NFT Floor Price
We’ve listed down the three different types of NFT floor price you will find in the marketplace and what each of them means:
Depending on the current market value, the floor prices continuously change from time to time. This is where real-time value takes place in the market. The real-time value is what people generally consider when buying and selling NFTs. Take note that real-time prices always fluctuate either up or down.
Decreasing Floor Price
A decrease in floor price is considered to be common, hence, if you are part of any NFT project and the floor drops, remember not to panic. Instead, take some time to do your research and find out why the value is decreasing.
Look for any negative aspect that may have occurred, if there’s any and you think it makes people doubt the value of the project, you might want to consider selling your NFT before it becomes irrelevant.
However, if you don’t have any solid proof that the project has done something to negatively affect its reputation, don’t sell your digital assets immediately. It’s more likely that people are just impatient, pulling their money out to look for another project which they can invest in.
Increasing Floor Price
Increasing floor prices may mean good things but not every time. Similar to a decrease in floor prices, this could also be a result of new development or it can also be just an artificial pump in an attempt to convince more people to make an investment in a certain project.
An increase in floor price isn’t always the best time to purchase an NFT as it comes with a higher price tag. It is ideal to buy an NFT once the price dips but make sure the price dips aren’t the result of a negative event that has occurred.
Factors That Affects NFT Floor Price
There are several factors that are responsible for NFTs floor fluctuations. These include:
Demand for NFTs
One of the most common factors that affect an NFT’s floor price is the demand for a certain NFT collection. If the demand increases, the floor prices increase as well. Similarly, a minimal demand can result in a lower floor price.
Utility or Offering
Utility refers to the actual value an NFT can offer. Some NFTs may provide physical items, membership, services and access to special events that are exclusive to NFT holders. The volume of utility offered usually affects the NFT floor price. NFT buyers and investors usually compare NFTs that offer real-world perks to those that don’t.
Reputation of the Brand
Another factor that can affect the NFT floor price is the reputation of the brand. When someone as popular as a celebrity drops an NFT collection, the floor price is likely higher than those who are new in the NFT space. One reason is that well-known creators have already gained the trust of the community. Hence, they appear to be more reputable and trustworthy.
Collaborations between two prominent brands can essentially double the value of an NFT. Thus, you could expect higher floor value and higher prices on secondary markets.
Purchasing NFTs on their floor prices can be considered a great idea as you can buy them at the lowest price possible and earn an even higher profit by selling them. But if you’re planning to do so, make sure to do your own research, study the types of NFT floor prices and familiarise yourself with the list of factors that can affect the pricing.