The phrase “floor price” will definitely come up in conversation if you’ve ever been around NFT enthusiasts, or if you’ve only recently begun researching the NFT market, you’ve probably already been advised to look into it.
The idea of a floor price is actually quite straightforward when you think about it. That price is the minimum at which an asset cannot be sold. A centralized exchange is in charge of determining a floor price in conventional finance.
For instance, if a stock drops below a certain level, the exchange could cease trade to stop prices from falling any further.
Every NFT is distinct and has several qualities that make it unique or valuable. The precise value of an NFT is also challenging to ascertain due to these characteristics.
Collectors and investors wishing to purchase NFTs may find it difficult to determine whether an NFT is worth their money since unlike tangible assets like artwork or physical collectibles like playing cards, which have established prices, NFTs do not. NFT measurements, including floor price, are useful in this situation.
Even though the floor price is straightforward to comprehend, it can be difficult to know how to maneuver around it when it changes. The NFT floor pricing and everything that it entails are discussed in this guide.
What is NFT Floor Price?
One of the most popular measures used by collectors to assess a project is the “floor price,” which refers to the least expensive NFT within a collection.
In other words, the NFT floor price is the cheapest price at which you can purchase an NFT from a collection.
The person who owns an NFT in a certain project and advertises the NFT for sale at a price less than all other sellers inside that specific project establishes the floor price.
An NFT’s floor price is initially determined by mint by the NFT project’s founder or firm. Holders who offer their coins on a secondary market once the minting procedure is complete set the floor price.
Why is it Important
The price below which no one may sell an NFT on an exchange is known as the “NFT floor price.” By using this approach, buyers are shielded against sellers who aim to undercut the value of their NFTs.
It ensures that sellers receive a fair price for tokens and that buyers don’t overpay for NFTs.
An NFT floor price may be determined by many players. When crypto finance functions like traditional finance does, exchanges can determine this threshold.
But keep in mind that not all NFT exchanges use a floor price. Be careful not to overpay for an NFT because those that do have a high floor price.
It’s crucial to conduct thorough research on any NFT before making a purchase. This inquiry includes examining the NFT’s pricing on several exchanges and confirming its floor price.
You can be sure you’re receiving a fair deal on your purchase by doing this.
Types of NFT Floor Price
- Real-time Value
The floor pricing frequently alter throughout time depending on the state of the market. As a result, the market, upon which most people base their purchasing and selling decisions, experiences real-time price adjustments.
To track NFT collections, the majority of cryptocurrency players use NFT floor price charts. NFT floor price monitors like niftyprice.io, nftpricefloor.com, icy.tools, nftcharts.io, and cryptoslam.io are some of the more well-known ones.
- Decreasing Floor Price
There is no need to panic or sell your digital asset on the spur of the moment if you are a participant in an NFT project whose floor price is falling. It isn’t necessarily a terrible thing; in fact, it is thought to be very typical.
The value of an NFT is determined by a number of variables, and these variables change over time in response to things like new project developments, the addition of new holders, and utilities.
You never know when one new NFT project might replace another, but that doesn’t mean it won’t collapse at some point in the future.
Although NFT’s floor prices are a reliable indicator of a project’s direction, you shouldn’t totally rely on them.
- Increasing Floor Price
Avoid making an impulsive buy if you see an NFT’s price surging. Increasing NFT’s floor price is frequently a smart idea for a variety of reasons. It may also serve as a manufactured boost to the buzz in an effort to attract more investors for the project.
Both situations call for thorough analysis, particularly when the floor prices exhibit large volatility. The same factors that led to lower floor prices still exist, such as new developments, partnerships with powerful people, increased utility, or a bright future.
If you don’t plan to sell the NFT for a profit right now, make sure whatever is driving the price growth is real and not just hype.
Keep in mind that while you are paying more when the floor price increases, it isn’t always the optimal moment to purchase an NFT. Typically, you want to invest in a project when the price declines, presuming the decline isn’t the result of a bad event.
How to Calculate NFT Floor Plan
Since the floor pricing for an NFT varies depending on a number of variables, there is no ideal response to this query. The asset’s scarcity, demand, and general market circumstances are some factors to take into account while setting the floor price.
Setting your NFT’s floor price below its current market value is often a good idea. By using this approach, you can make sure that there is opportunity for expansion in the future while also avoiding any possible risks
Keep in mind that the floor price, rather than the NFT’s average price, is always the lowest price. If the other owners of NFTs from the same collection list them for sale at 0.4 ETH or more and you list the NFT for sale at 0.2 ETH, the floor price is now 0.2 ETH.
Therefore, it is not an average; rather, it is the lowest cost at which one must get an NFT from that particular collection.
The costs involved in purchasing and selling the item must also be taken into account when determining the floor price. Include these costs in your calculations as they may have an impact on your profitability.
You can speak with a qualified appraiser or expert if you’re unsure of how much to charge for your NFT. They will be able to assist you in choosing a price that is both fair and reasonable for your asset.
The Benefits of Floor Prices in the NFT Market
Market stability and clarity are provided by floor prices. Since they are aware of what they are purchasing, consumers can make plans. Additionally, sellers are aware of the value of their NFTs, ensuring that no one will take advantage of their credulity.
Floor prices can aid in boosting market liquidity, making it simpler for consumers to trade NFTs. Additionally, this level can aid in preventing underpricing of NFTs. In other words, buyers are receiving a fair deal, while token sellers are not allowed to demand too little.
Floor prices can also aid in reducing market speculation. If people are aware that the price will have a lower bound, they will be less likely to buy and sell tokens.
Potential Risks Associated with a Floor Price
In order to prevent purchasers from being taken advantage of by sellers, floor prices can be useful. They do, however, have some dangers.
A floor price can, first and foremost, fudge the value of a token. This can result in expensive tokens and inflated market prices as a whole.
Second, a floor price may cause the market to become stagnant. Knowing that a high floor price will prevent them from turning a profit may discourage people from trading tokens. In this situation, the market may experience issues with liquidity.
Finally, market manipulation might result from a floor price. To take advantage of purchasers, sellers may attempt to undervalue their tokens and sell them for less than they are worth. This trade may result in an unjust playing field and market turmoil.
The Causes of Fluctuations in NFT Floor Prices
NFT floor pricing changes can be attributed to a number of factors, such as:
- Demand for the NFT
The floor pricing of a particular NFT collection rises in response to rising demand. Similar to this, anticipate a cheaper price from the market if there is little demand.
- Added Utility or offering
Many NFT initiatives provide little real value to investors, which causes the floor price to gradually decrease over time.
However, those who have leveraged NFTs to create profitable businesses and ecosystems around them offer their holders genuine value and utility. In turn, this raises the floor price.
- The Brand’s Recognition
The floor price is probably greater when an NFT is dropped by a well-known trader. This is merely a result of the confidence that has already been established between the community and the creator. A newcomer to the market, however, must first earn the trust of customers.
However, they could if they really wanted to. This does not imply that reputable companies and well-known producers will offer NFTs at the higher floor price.
The NFT practically doubles in value when well-known people join forces to establish a project. Coldie’s collaboration with NFT singer Snoop Dogg is one such instance. Together, they released the “Decentral Eyes Dogg” NFT, which sold for a huge amount of money—188.8 ETH.
Due to their popularity and the personalities attached to them, these NFT releases continue to command a premium price on secondary markets and have even higher floor prices.
How To Avoid Floor Price Manipulation
Learn how to set a floor price to avoid floor price manipulation in the NFT market. Although exchanges have already been noted, the auctioneer or a prearranged algorithm often determines the floor price.
It’s also crucial to remember that there are no restrictions on changing the floor price while an auction is taking place. Depending on the circumstances around the bid, this condition occurs frequently.
Always study the transaction history of the NFT you intend to purchase and DYOR to determine the project’s long-term value to prevent falling victim to floor pricing that have been influenced by a sweep.
Join their Discord and Telegram groups and determine whether their communities, such as their social media following, are reliable to aid in making decisions about NFT investments.
It’s not a bad idea to purchase NFTs at their floor price because you may do it for the lowest cost and then sell them later on for a profit.
The drawback of this is that after an NFT project sells out, the floor price frequently drops even further. As a result, you will now have to sell your NFT at a loss if you don’t want to keep it.
Despite certain potential hazards, floor prices provide several advantages for the NFT market. They help boost market liquidity, prevent speculation, and guarantee that purchasers receive fair prices.
It is crucial to comprehend how floor prices are established in order to prevent their manipulation.