What is an NFT Floor Price?
What is an NFT's floor price? You've likely come across the term before, but what does it actually mean? Take a closer look below.
If you’ve browsed through an NFT marketplace, or even just read about the latest in the NFT space, you’ve likely heard of the term floor price before – but what does it actually mean?
In general, a floor price is generally defined as the lowest price at which an asset can be bought or sold on the market. It’s easy to understand, but figuring out how to work around it when it fluctuates can be tricky.
In order to understand all the benefits of a floor price in NFTs, you need to understand what that means first. This article will explain everything you need to know about NFT floor prices, so you can choose the best NFT project for you.
New to NFTs? Read our intro on non-fungible tokens (NFTs).
What is an NFT floor price?
The term “floor price” refers to a minimum price that can be charged for a commodity, good, or service. Governments usually set up a price floor in order to protect producers of the commodity from low prices that would threaten their financial existence.
Floor price, in the context of non-fungible token (NFT) projects, is the minimum amount of money that people must spend when purchasing NFTs.
It was set by the creators who own the NFT. To put it simply, floor price is the lowest price you can buy from a collection item, rather than the average price of all items in the collection, and is updated in real-time.
This could help buyers determine the fair market value of an NFT at the collection level. This helps buyers focus their decision-making process and analysis by stripping away in-collection factors such as rarity, traits, etc.
For example: One of the famous projects that skyrocketed in early 2022 – Bored Ape Yacht Club.
The current floor price for this NFT project is 78.382 ETH with 672K total volume. Which means the lowest listed price for BYAC NFT on the marketplace is 78.382 ETH, or 161428.97 NZD converted into New Zealand Dollars.
Tip: You can view the latest rates for any cryptocurrencies that we have by visiting our complete list of crypto assets.
Types of NFT Floor Price
As a new NFT enthusiast, you should know that there are three types of floor pricing. Here’s what they mean.
It gave a real-time view of the price changes in NFT projects. These changes are determined by people who buy and sell NFTs. Many people track the price changes using charts. You can find those charts on cryptoslam.io or nftpricefloor.com.
Decreasing Floor Price
When you see NFT prices are plummeting, you might get panic or freak out. However, it’s not necessarily a bad thing—it can actually be quite common.
These fluctuations are due to several factors that determine an NFT’s value, and these factors keep on fluctuating depending on things like new developments in the project.
We can use the decreasing floor price as an early warning sign that a project may be in trouble. Although we do not know when some projects will crash down in the future, we can use a model to predict how much risk we can take on.
Increasing Floor Price
If you see the floor price increasing, you might have an impulsive decision to invest. A possible cause of this is that more people are buying into the project, and another possibility is that it is being pumped by artificial means.
If you are uncertain about which reason is driving the increase in floor price, it is best to wait until you have gathered enough information and knowledge about the project before making any decision.
Read more: What Determined the Value of NFTs?
How to Analyze The Floor Price of an NFT?
Step 1. Check the Average Floor Price Value
Some NFT projects may be listed for sale on different platforms. These platforms are often referred to as NFT marketplaces. By looking at the prices of these projects on different marketplaces, you can get an idea of what the average price is and whether you’re getting a good deal.
Step 2. Evaluate Liquidity
There is a lot of concern about liquidity in the investment world, especially when it comes to non-fungible tokens, or NFTs. Liquidity refers to how fast you can cash out an asset. When it comes to NFTs, liquidity means how easy you can sell an NFT and exchange it for a token.
Many investors are worried about the lack of liquidity in the NFT market because they want to be able to quickly sell their assets if they need extra cash. If they invest in a project that isn’t easily turned into cash, they might end up losing money if they need to sell their holdings quickly.
In the NFT space, we could see how liquid a project was by how often they made sales within a period of time.
Step 3. Price Manipulation
Some projects use artificial strategies to manipulate the price of their NFTs. One such strategy is called wash trading, where someone mints their own NFTs and buys them back in order to make the price go up. If you don’t pay attention to this, you might end up buying a scam project.
Minting is the activity of creating new NFTs so that they can be traded.
Deep dive to: How to buy NFTs?
Why NFT Floor Prices Fluctuate?
If you look at Google Trends, search for NFT and cryptocurrency. You’ll see how volatile the graphs are. Although we can’t assume this as the real condition, we can still take a look at it to see what it tells us.
NFTs are associated with cryptocurrencies because they are used on blockchain platforms that use NFTs as a form of payment. In other words, if someone wants to buy something on a blockchain platform that uses NFTs, they need to have an account that has some amount of crypto funds in it.
The price of NFTs fluctuates because the value of cryptocurrency fluctuates. Since crypto values go up and down constantly, so does the price of NFTs.
Another reason why NFT prices fluctuate is because there is no centralized authority regulating them or controlling their production rate.
They are controlled by their respective creators and/or developers who set their own rules as they please without any interference from third parties like governments or banks.
Related article: What Makes Crypto Volatile?
Where to Buy NFTs?
There are many different marketplaces for non-fungible tokens (NFTs), which means each one serves a different purpose.
For example, some focus on providing liquidity while others focus on providing users with a secure place to buy and sell digital assets.
The most well-known NFT marketplace is OpenSea, which launched in 2017. It’s a centralised marketplace where users buy and sell ETH-based NFTs using Ethereum (ETH).
The biggest advantage of this platform is its wide selection of items—it’s easy for buyers to find what they’re looking for!
Are you looking to get into NFTs?
If you’re thinking about investing in NFTs, it’s important to understand how the floor price works.
NFT Floor Price is the minimum price that an NFT can be sold at. The floor price is usually set by the person who created the NFT, but it can also be set by a third party (such as an auction house).
As always, be sure to conduct your own research before investing in a digital collectible. Read the whitepaper, check their socials. and join their community. Use your best judgment and don’t invest more money than you can afford to lose.
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated January 11, 2023