Being a newbie in the NFT world is indeed very intimidating because there’s a ton of information that comes out of nowhere all at once. What maybe started as getting one of Reddit’s collectible NFTs, now seems like an endless loop of financial rocket science! “What the hell are all those charts, why are people talking about sweeping floors?” I admit it does sound nonsensical, but actually, NFTs are digital assets so it is natural that they behave like stocks. That’s why you hear financial terms intertwined with the purchase of an NFT. Let us make life a little bit easier, next time you want to purchase a non-fungible token, evaluate your investment with these 15 NFT metrics.
What Are NFT Metrics?
To better understand NFT metrics let’s make a simple analogy. When you want to buy a new laptop you go looking for certain qualifications like RAM, GPU, CPU and etc. There are certain specs you need for different uses of the laptop. For example, if you want to use a laptop for gaming you need different specs than if you want to use it for content writing or drafting as an engineering student. Therefore, these specs indicate the kind of experience you get from the laptop depending on your end-use intention.
NFT metrics help you evaluate if this NFT is worth spending your money on. Also, it quite literally dictates the experience you would get from that purchase. For example, some NFTs grant you access to an alpha community, some give you physical merch, and some are just a flex – like buying a Rolex.
NFT Evaluation Checklist: The 15 Metrics
I’m not claiming these are the only metrics to look at when you want to evaluate an NFT project you’re interested in. However, these are the most important. Let’s get into introducing the NFT metrics first and then explain how you can use them together in a full circle. Each metric will be split into three questions and an example:
– What is it?
– Why is it important?
– How can I find it?
1- Floor price
What?
The floor price, often abbreviated as FP, is one of the most important NFT metrics of a project. It denotes the price of the cheapest NFT in a collection. Basically, sweeping the floor means buying NFTs at their floor price.
Why?
The floor price indicates the value of an NFT project. A more expensive floor price indicates a higher demand for the collection, hence the more important and valuable the NFT collection becomes. It’s also viewed as a strategic entry point into an NFT project.
How?
This metric is usually displayed in plain sight on every secondary market or analytic tool.
Example
BAYC currently holds the highest floor price (81 ETH) among all its peer NFT collections.
2-Trade Volume
What?
Volume traded or trading volume of an NFT collection refers to the total amount of currency (ETH or USD) exchanged between buyer and seller in a specific time interval of successful NFT sales. It can be set in the last 24 hrs, week, or all time. All-time trade volume means the amount of money paid since the release of the NFT collection.
Why?
This NFT metric signifies the general demand for the NFT collection. If the overall trade volume was high this means that the project creators have enough liquidity to keep the project running. This also means that you have a higher chance to enter and exit the NFT project with minimum loss.
How?
You can find it on OpenSea or in most NFT tools. Scroll over the activity section on opensea. You usually see it in a chart represented as a bar.
Example
Poieeeyee x Reddit Collectible Avatars surpassed CryptoPunks back in October, taking its number one spot on Opensea’s Top list by 24-hour trading volume, with 700+ ETH in total volume!
3- Sales
What?
This NFT metric refers to the individual sale of each NFT in a collection. It can be measured as a count of sales per day/week/all time.
Why?
It gives you an insight into how the collections’ individual NFTs are doing. It’s a macro view of how every NFT in a collection is performing.
How?
You can view the sales of an NFT collection in most NFT Analytic Tools. They usually look like a scatter plot mapping every NFT’s sale in a chart.
Example
NFTinit offers a really interesting tool that lets you see the individual sales of an NFT collection. In the following demonstration, we are looking at Valhalla which has a current FP of 0.94 ETH. It’s notable to see how many individual NFTs from Valhalla are selling way above their floor price at almost 4.5 ETH.
4- Rarity Rank
What?
The rarity rank determines how uncommon (rare) a specific NFT is relative to other NFTs in the same collection. Consider it a metric to reveal the stars of an NFT collection, and usually investing in these type of NFTs bring in the most money.
Why?
NFTs with a high rarity score, attract more buyers. The rarer NFTs sold from a collection, the better it is for the collection as a whole as it increases its ceiling price. It’s also human nature to be attracted to unique assets, for example, if everyone had a Ferrari, it wouldn’t hold that exclusive rarity and price.
How?
You can check for the rarity rank of an NFT collection using Rarity tools. Chainwitcher offers a really insightful tool, you can try it out now.
5- Ceiling Price
What?
The ceiling price is the price of the most expensive NFT in a collection. Buying the ceiling is seen as a high-risk, high-reward NFT trading strategy.
Why?
This NFT metric shows you how much people are willing to pay for the most expensive NFT from a collection. This sets the tone for the value of rare items in the collection, and eventually its success.
How?
There’s a filter button on OpenSea that can display the NFTs in your desired order. By default, it shows them from low to high. To find the ceiling price set the filter from high to low.
6- Provenance
What
One very important NFT metric in assessing a collection is its provenance and this refers to the history of ownership of an NFT.
Why
Tracing back the NFT to the hands that dealt with it down to its original source is an often overlooked metric while evaluating an NFT. For example, an NFT owned by an influencer has a higher price value. Sometimes people don’t notice the ownership history and underprice their NFT.
How
To find previous owners of an NFT after it has been minted, you can check that from OpenSea’s item activity section. Just press the NFT you’re interested in and scroll down to find “item activity”.
Example
7- Smart Contract
What
The smart contract is a software program that automates transaction deals between buyer and seller on the blockchain. It also holds all the information about a specific NFT collection.
Why
It’s important to understand your right as the owner of a certain NFT collection. For example, some collections give you ownership without copyrights while others give you a CC0 license. Also, smart contracts help you find where your NFT is stored whether on or off the blockchain. If off-chain you can also know where exactly. That plays a huge deal in assessing the permanence and value of the NFT.
How
You can fetch for ownership and copyright in a collections website or discord server. To find where a collection stores its NFT you can use the smart contract to fetch the source.
Example
Autoglyphs are an NFT project stored on-chain (which you can know from the smart contract), that’s why it has a very high floor price. Check this article to know how to find where your NFT is stored.
8- Market Cap
What?
Market Capitalization is obtained by multiplying the collection’s floor price by its total supply. It is used to assess the size and success of an NFT project. Obviously, the supply is a constant number in NFT collections so it’s up to the floor price to pump up the market cap. The higher FP, the higher market cap, and the bigger the collection.
Why?
It’s an important NFT metric that can help show a collection’s growth and how it compares in competing with other NFT projects. For example, if a collection has a 10k supply and an FP of 1 ETH its market cap is 10k ETH. Another collection that has a 5k supply and FP of 2 ETH also has a 10k ETH market cap. This shows that the 2 ETH collection is doing better than that of 1 ETH and has better prospects for the future.
How?
You can do manual calculations by multiplying a collection’s supply with its recent floor price or refer to websites that do the math for you, like coingecko.
Example
One of the leading influencers in the NFT space, NFT Nate, talks about the importance of market cap in this video.
9- Project Founders
What?
The team’s background is a very crucial NFT metric that represents the set of people responsible for creating the NFT collection you are interested in. Knowing who created the NFt collection helps you avoid getting scammed.
Why?
It’s important to have a fully known (doxxed) team with portfolios that showcase experience. The amount of experience and money put into an NFT project makes people trust and support the collection.
How?
You can check the official social media accounts or the website. If you search everywhere and couldn’t find the NFT project’s founders they are probably keeping themselves anonymous. This is a ground for worrying.
Example
Most celebrity NFT projects are doxxed, and maybe that’s why most of them make a huge success. For example, Eminem’s first NFT collection is titled Shady Con sold for $1.78million on Nifty Gateway. The most valuable item in ‘Shady Con’ was Stans Revenge and sold in an auction for $100 million.
10- Community Power
What?
Community power indicates the number of people supporting the NFT project. In web2 terms, it refers to the fandom behind a project.
Why?
The higher and more engaged the community, the more potential buyers are gonna come. This indicates that the project may have a high floor price and trade volume in secondary marketplaces.
How?
You can check a project’s community power by seeing the Twitter followers and Discord members. However, don’t be fooled by the number of followers as they can be bots or bought. Always look for a high level of engagement in likes, retweets, replies, and general interactions.
Example
Sappy Seals NFT collection has one of the strongest communities out there, you can find a lot of engagement from them. Therefore, it’s a good sign that the project has a future.
11- Holders/Owners
What?
This NFT metric should never be overlooked. Holders refer to the number of individuals holding or owning an NFT from one collection in their wallet.
Why?
The higher number of holders indicates a healthy collection with less chance of a scam. Another metric within this metric is holder distribution, and you should always compare it to the total supply from an NFT collection- it’s usually between 5k – 10k. If the majority of holders own 1 NFT in their wallet it’s normal. However, if there’s a majority holding 100+ NFTs, this gives them the power over the collection’s performance. You shouldn’t buy from a collection with a shady holder distribution. Note that sometimes there is a wallet that shows a huge amount of NFTs from the collection, and it’s normal as it could be the founders reserving some NFTs for an airdrop or giveaway.
How?
OpenSea makes your life easier and shows you how many owners there are in a collection along with the percentage of unique owners in the top banner of any NFT collection. There are other NFT tools that help you dive deeper into NFT holder metrics such as NFTinit and our current favorite, Nansen.
12- Purchase intention
What?
Purchase intention is something you have to investigate when evaluating an NFT collection. Essentially it’s about finding the reason WHY people are buying into this NFT collection. Knowing the purchase intention behind a collection helps you determine its long-term success.
Why?
You need to know the difference between buying into something because it’s a good investment, a flex, a collectible item, or just out of FOMO. If everyone bought in because of hype or FOMO it probably will lose traction over time. It’s not wrong if you just want to own a certain NFT to add it as a collectible to your digital portfolio. However, always figure out the reason people are buying.
How?
It’s pretty tricky to know other people’s purchase intentions, but not impossible. To best figure this out, you should keep up with the official social media platforms of the project and see what people are saying about it. That’s why it’s best to focus this specific metric on yourself and ask “ Why do I want to buy this NFT? “
Example
Cryptopunk is considered nothing more than a flex. people own it to show off like owning a Gucci limited edition. So the purchase intention is simply showing off.
13- NFT utility
What?
Utility NFTs provide holders with real-world rewards and other privileges linked to ownership. Therefore, the NFT goes beyond being a digital collectible and more of an access to something else.
Why?
An NFT that offers utility is often far more valuable and expensive than one that doesn’t. The more utilities a project offers shows more effort put by the project founders to benefit their audience. It’s a much better investment to buy NFTs that go beyond just flexing.
How?
You can find the NFTs’ specific utility on the websites or by scrolling the Twitter and Discord feeds.
Example
Sometimes the NFT itself is a utility for example it will be membership access, music experiences, or access to an NFT tool – like ORIGINS.
14- ROI
What?
ROI stands for Return On Investment and is the percentage of how much money has been made compared to an initial investment. If I pay 0.5 ETH to buy an NFT and then sell it for 1 ETH, my ROI is 100% meaning that I doubled my investment.
Why?
By measuring an NFT’s ROI, you can see how much money you could earn or lose when investing in it. In the NFT world, this could be either by flipping the NFT or staking it for a period of time in the hope that it will have big rewards.
How?
You don’t need to trouble yourself with manual calculations, especially when there are many fees included in the single sale of an NFT. That’s what NFT Profit calculators are made for, go give it a try!
15- Creator Royalties
What?
When the founders create an NFT project, they attach to it a creator royalty fee. This way even when their collection supply sells out on mint, they can still make a percentage from every time it sells on the secondary market. They are typically set between a minimum of 2.5% and a maximum of 10% of the sale price.
Why?
It’s important to note that most traders hate paying creator fees as it deducts the total profit. With a higher trade volume, royalty fees generate a substantial source of revenue for the creators to keep funding their projects for a long time.
How?
The easiest way to find the creator’s royalty is on the page of an NFT collection in a secondary marketplace. It helps to know what you are paying for and whether it’s worth it.
How Should I use NFT Metrics?
There are three pillars you should ALWAYS compare the beforementioned 15 NFT metrics to. These are every project’s starting point and differ greatly from collection to collection.:
- Launch Date
- Total Supply
- Mint Price
Most secondary marketplaces like Opensea, X2Y2, Blurr, and others list the total supply and launch date of every collection. What’s tricky to find is the original mint price, and it’s such a hassle to type it into google. That’s why I got this solution for you, you can use NFT PRICE FLOOR website to access almost all the basic details you need about an NFT collection- most importantly its mint price!
Metrics In Action:
For a brief demonstration, let’s look at Art Gobblers and Sappy Seals.
Sappy Seals:
- Launch date: August 31, 2021
- Total supply: 10,000
- Mint price: 0.06 ETH
- Floor price: 1.645 ETH
- Market Cap: 16,450 ETH
Art Gobblers:
- Launch date: October 30,2022
- Total Supply: 2,000 (1,700 For public, 300 for founders of the project)
- Mint Price: FREE , only gas fees were paid
- Floor Price:
- November: 19.3 ETH peak
- At the time of writing: 1.94 ETH
- Market cap:
- November: 32,810 ETH
- ATW: 3,207 ETH
The Breakdown:
Looking at sappy seals’ current floor price (1.64 ETH) and Art Gobblers’ current floor price (1.94 ETH) alone literally tells you nothing at all. No valuable insight into the collections whatsoever. More so, if you look at the market cap of sappy seals (16,450 ETH) you find it more successful than Art Gobblers’ (ATW 3,207 ETH). That’s exactly why you need a reference point to compare these collections to. This would be each collection’s launch date, mint price, and supply.
Sappy Seals launched since 2021, while art gobblers was only launched 2 months ago- specifically October 30. Moreover, at its peak in November Art Gobblers reached a floor price of 19.3 ETH and market cap of 32,810 ETH with only 1,700 NFTs in supply.(P.S. It dipped down for a reason). At that same time in November Sappy Seals was not worth more than 0.4 ETH.
Which collection was a better investment you may be asking, honestly there’s no right or wrong answer. For example, whoever minted Art Gobblers for free made a ton of money so obviously at that time it was a brilliant investment. Similarly, whoever bought sappy seals back in November (when FP was 0.4 ETH) made a decent amount of money now. I’m not trying to give you a detailed analysis of each collection as that would take an article on its own. My point is always to see the full picture and find the reference points to evaluate a collection with the above 15 metrics.
Key Takeaway
You shouldn’t depend on one specific metric to determine the value of an NFT. If a collection has a high floor price now, it doesn’t mean it will keep it for a long time. For example, The Legend of Cockpunch NFTs had a secondary marketplace floor price of 3.7 ETH and dropped to 0.88 ETH in under 10 days! So contrary to common belief, the floor price is not everything. NFT metrics should be seen as a full cycle and if one important NFT metric should be singled out it is YOUR PURCHASE INTENTION.
The focus should be on you, so always ask yourself questions like these:
– Why am I buying this NFT? Just because everyone else is?
– Can I afford to lose money from this purchase?
– Is this NFT collection worth my support?
– What benefit am I getting from this NFT?
Now you make think I’m making it sound like a big deal because it is! Always have a ready checklist with the minimum of these 15 metrics and be careful where you put your money. Now keep in mind that I don’t claim to be a financial advisor, but I can point your attention to some interesting projects in the NFT space. The evaluation must always be done by YOU!
Speaking of interesting projects, the Shibuya platform seems to be revolutionizing the technology of NFTs, use the metrics you just read, check the project out and judge for yourself if it’s worth investing in.