The NFT universe is full of enthusiastic phrases and buzzwords, and with every new technical advancement, there are always words used to describe the current state of the project or market in general. That’s why we are focusing on the NFT floor price today as it can be one of the most important aspects to learn if you want to be successful.
The floor price is the lowest amount you can pay to get the NFT from a certain collection. However, even though this simple definition is true there are many additional aspects of the floor price you need to know about.
So, if you are ready to become an NFT pro and learn how to determine and use the floor price to your advantage, keep on reading.
What is NFT Floor Price?
The NFT floor price is the lowest amount of money you can pay to own the NFT from a certain project or collection.
If you are new to the NFT universe you might have heard the phrase “floor price” being mentioned often. And while it’s not hard to understand that the floor price is simply put the lowest price in the collection there are a few things this value can determine.
Many NFT experts claim that the NFT floor price determines the value of the entire project. Most inexperienced owners would get scared and panic-sell their NFTs if they see the floor price dropping. However, the truth lies somewhere in between.
The floor price is determined by the original creator during the minting process and later by the owners of the NFT on the secondary markets. But, this price can be manipulated and played with to hype an NFT project or to “sweep the floor”. So, before making any transactions and buying an NFT you should also consider the other parameters such as rarity and utility.
You should know everything about the NFT floor price. Keep a close eye on any sudden changes. It’s not, however, the only thing that determines the true value of the NFT project. This is why you need to do your own research and use good rarity tools to be on the safe side in the volatile NFT universe.
How Is the NFT Floor Price Calculated?
You can see the floor price for any NFT project on platforms like OpenSea and it’s simply the asking price of the NFT owner who is selling their NFT for less money than other owners in the collection.
When the NFT has been minted the creator sets the floor price. In the secondary markets, the floor price is determined by the NFT owners and it’s not always the best representation of the project value.
You can sometimes see accidental lower prices or floor price manipulations. This indicates that something is going on with the project. But, you also need to pay attention to the trading volume and see how many people are making transactions in the first place.
What Determines the Floor Price?
As the floor price is determined by the NFT owners there can be massive fluctuations and big changes even when it comes to less popular NFTs. Considering the humans are behind the set price it’s susceptible to mistakes and influenced by many factors, including:
As the popularity and demand for a certain NFT project rises, so does the floor price. The famous BAYC now has a floor price of 73.7 ETH and the demand is always high. The more popular the project becomes the higher the prices will be and vice versa.
NFTs have come a long way from simple doodles and profile picture art, and now the community is demanding added utilities. This also means that the more utilities one NFT project has the higher the floor price will be. It’s easy to understand that the value of NFTs with perks is higher than the ones that have no utilities at all.
Many NFT projects on the market are created by famous and reputable artists and creators. So, the reputation of the NFT creator can also influence the average price and the floor price. Owners of popular NFTs don’t want to sell the collectibles cheaply.
NFT communities and social networks play a huge role in determining the final price of the NFTs. Especially the floor price. If the NFT project has a lot of online support, active social media channels, and Discord the chances are the price will reflect that positive notion.
One of the major influences on the floor price is the support from famous people and influencers. If a celebrity purchases an NFT from the collection and supports the project the value instantly increases and the floor price goes up.
How to Use NFT Floor Price to Determine the Value
The NFT floor price is just one of the parameters to consider. Especially when determining the value of an NFT or the entire project. Considering the floor price can be manipulated and changed, you need to rely on other aspects of the NFT such as the rarity and utility among others.
Here are a few suggestions on how the floor price can determine the value of the project. IT will sure help you make the best investing decisions:
The floor prices of any NFT project are changing constantly, but usually, the changes are small and not too significant. When the project is stable, has a good reputation and there are no sudden changes in the market the floor price can be the real-time value.
Increasing Floor Price
Increasing floor prices might look like a good thing. It indicates that the NFT project is gaining traction. However, it’s not always the best reason to make impulse purchases. When the prices rise organically because the NFT project is high-quality, has a good road map, and has an active community it’s safe to say the floor price is realistic.
Sometimes the floor price of certain projects is artificially pumped. They do so to make it look like there is a lot of demand.
So, before buying into the hype you should do more research. Furthermore, join their Discord channel to find out what all the fuss is about. Don’t get carried away by the enthusiasm and always ensure you are buying the digital assets for the right reason.
If you are a fan of NFT projects or simply have a few tokens in your collection you might get really worried if you see the floor price dropping. But, this is not always a good indicator that you should sell your NFT but rather be cautious about the market.
Indeed the price fluctuations can be scary if you are new to the NFT universe. Keep in mind that the crypto market has always been volatile and susceptible to changes.
So, just because the floor price is dropping doesn’t mean the NFT project is a failure. Make sure to reach out to the community and the creators behind the project. Find out what is going on before making any rash decisions.
How to Use It To Increase Profits
Now that we are familiar with the concept of NFT floor price you might be wondering about the practical ways you can use this data to increase your profits.
It’s rather simple to understand that buying an NFT at a lower price point and selling it at a higher price will make a profit. However, there are additional tips and tricks that can help you make the best investment decisions.
1. Check the range of prices in the NFT collection
When you view an NFT collection on OpenSea you will be able to see the floor price at the top. But, make sure to look closer at the item that has the lowest price. Always compare it to other NFTs in the collection.
Sometimes the odd one out drags down the floor price. The real price of the other NFTs in the same collection can tell you a lot about the true value.
2. Check volume traded
In addition to the floor price and the price of other NFTs in the collection, it’s very important to check the volume traded. This is a good indicator of the viability and popularity of the project. As things move fast in the NFT world, you need to see transactions being made every few minutes.
However, keep in mind that popular and expensive projects don’t have too many transactions. Simply because the sellers are not looking into selling their assets. Also, there are not too many people with that budget.
3. Consider the floor levels
All NFT projects have a floor price, but many people don’t realize that there are also floor levels to be considered. If you see an NFT collection you should also consider the traits on the side. Then click on individual groups to see the floor price on that level.
This can help you find rare NFTs and look at the floor prices for those items. It’s also a good idea to rely on reputable rarity tools that can help you with the decision-making process.
4. Buy rare NFTs for more profit
Usually, the NFTs with rare traits are more valuable, but you can often find rare items at near-floor prices. All you have to do is visit the Rarity.tools platform and find the NFT collection that interests you.
Once you arrange the items by price from low to high, you will be able to see the rarity score on the top. Also, the price is at the bottom of each NFT. This is a great way to purchase those rare NFTs at lower prices.
For example (as shown in the screenshot), you can purchase a Doodle #5294 for 0.69ETH. The rarity score of that item is way better than the NFTs from the same collection selling for much more.
In a nutshell, the floor price is the lowest asking price for the NFT in the collection. It can be a good indicator and show you the success and value of the project. Always keep in mind that there are many other things to consider before purchasing.