NFT Floor Price
In 2021, the NFT market saw a significant increase in interest, and the trend is expected to continue, with startups building new dApps, DeFi apps and NFT marketplaces as well as spreading to other blockchains beyond Ethereum, including Polygon and Bitcoin (BTC) via Stacks, a blockchain layer built on Bitcoin, the most trusted blockchain with a market cap of nearly $400B as of February 2023.
NFT projects such as Bored Apes Yacht Club and CryptoPunks sparked a new wave of interest in digital art and games in the crypto community. Social media, the quality artwork produced by creators and digital artists for their digital collectibles and the sense of community within the ecosystem also play a huge part in the popularity of these digital assets.
If you're interested in buying NFTs, the floor price is an important metric to consider, but there are a few steps before you can start collecting. For more information on how to buy NFTs, you can visit this article. If you don't have any cryptocurrencies, you will need to exchange your fiat (currencies such as dollars, euro etc) for cryptocurrencies (such as bitcoin, ether, stacks). You can head over to a crypto exchange platform such as Binance or Coinbase. Once you have cryptocurrencies and a crypto wallet compatible with the NFT marketplace you'd like to use, you can get started!
What is the NFT floor price?
If you've just started exploring the NFT space or the OpenSea or Gamma.io NFT marketplaces, you've probably heard about the NFT floor price.
The NFT (non-fungible-token) floor price is the current lowest price of an NFT in a given collection or project. It can fluctuate depending on community activity and sales, and is one of the essential crypto metrics and a decisive factor of the value of an NFT project. Whenever purchasing an NFT, whether it's selling at its floor price or higher, it is important to do your own research.
Initially, the floor price of an NFT is decided by the creator of the NFT project when they deploy the contract. Once the minting process ends, the floor price is determined by sellers on the secondary market: when an individual who owns an NFT in a particular project lists the NFT for sale at a lower price than other sellers within that project have, this lowers the floor price. Suppose most holders of a specific NFT collection list their NFTs for 0.5 ETH and you list yours for 0.4 ETH, then the floor price becomes 0.4 ETH.
While most NFT holders prefer to list their NFTs at a price higher than the current floor price, some may list their NFT at a lower cost to free up liquidity.
Why does the Floor Price of an NFT collection fluctuate?
Several factors are at play when it comes to floor price fluctuations and how the floor pricing is determined.
If the demand for a certain NFT collection increases, chances are the floor price will too. Likewise, if the demand is minimal, the market may set the price lower.
Companies that have used NFTs to build brands and ecosystems around them usually provide value and utility to their holders. Let's say an NFT project announces additional benefits for their NFT holders: that will likely boost the floor price.
The trust between the creator and their community is also an important factor: the floor price will likely to be higher when a well-known creator drops an NFT collection than when someone new to the NFT market does.
When influential personalities collaborate on a project, the NFT's value can double up: if Beeple and XCopy (both renowned artists in the NFT space) were to come up with a collaboration piece, you could expect the floor price to be impressive. Snoop Dogg's collaboration with NFT artist Coldie is also a good example: they launched 'Decentral Eyes Dogg' NFT, which sold for a gobsmacking 188.8 ETH (that's roughly 253k USD at the time of writing). Collections such as these continue to command a high floor price on secondary markets, due to their popularity.
Increasing and declining floor price
Although there are tools that can help you track trends and NFT collection floor prices in real-time, it is important to keep in mind that the NFT market and floor prices can be unpredictable and don't necessarily depend on trading volumes. Some collectors may be taking advantage of lower floor prices, thus increasing the trading volume of a collection rapidly.
Last December, the floor price of the Bored Ape Yacht Club (BAYC) NFT collection surpassed the floor price of CryptoPunks NFT for the first time. This generated a lot of media attention, as the BAYC NFTs are a lot more recent than CryptoPunks, which are regarded as the OG NFTs, introduced in 2017. In June, the BAYC was at the top of the trading volume list, with Mutant Apes second and virtual land for the Otherside metaverse right behind. However, according to data from CoinGecko, BAYC has been on a downtrend since reaching its all time high in May. Though an NFT's floor price is a strong parameter to judge where an NFT project is headed, these examples demonstrate how floor prices and trading volumes can unexpectedly rise or decrease, and show the importance of doing research before purchasing NFTs.