In recent months, the term “price floor” has become increasingly common in discussions about NFTs. So what exactly is a price floor, and why is it relevant to the NFT market?
In the NFT space, there are two seemingly simple propositions. One is that an NFT should be worth how much someone is willing to pay for it. The other is that every NFT price should always and intrinsically represent its underlying value with other digital assets in the market.
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What is NFT Floor Price?
A term borrowed from commodities trading, the floor price is simply the lowest price that a commodity or security can trade at. In commodities markets, price floors are often set by governments to protect farmers from being exploited by large buyers.
The NFT Floor Price is the lowest amount of money someone can buy an NFT for. It’s set by the creator and can fluctuate depending on the market.
In the world of NFTs, price floors have been proposed as a way to ensure that artists and creators are fairly compensated for their work.
The idea of using price floors in the NFT market has been met with both praise and criticism. Some argue that price floors would help to stabilize the volatile NFT market and prevent artists from being taken advantage of, while others believe that they would stifle innovation and creativity. However, one thing is certain: the growing discussion around price floors highlights the need for better data and transparency in the NFT market.
Understanding NFT Floor Prices
With the floor price being the lowest value, it means that the NFT is being obtained at its cheapest. This can later be sold off for a higher price, with ownership being transferred to the new buyer.
Flipping NFTs For a Profit
NFTs are often bought low and sold high in a process called flipping. Many buyers purchase items when they first drop, before the price goes up, and then hold onto them for some time. When an NFT sells out of its initial drop, these buyers become sellers, letting go of the item for a much higher price. Understanding how to research and act on floor prices will only increase the chances of a positive investment in a specific project.
Unnecessary Purchases
NFT investors should be mindful of the potential resale value of the tokens they purchase. Those with a higher floor price are likely to fetch a better return down the line, so it may be worth spending more upfront to avoid regrets further down the road. Of course, as with any investment, due diligence is key to ensuring success.
Real-Time Value
Every NFT has a base value that cannot be lower than the minimum floor price. This way, even if nobody is buying or selling at a particular time, you’ll never face any loss of investment.
Real-time updates reflect price fluctuation based on market value — reflecting supply and demand just like real-world assets — because of this, every NFT can be sold for greater returns if you sell it at the right time.
Many investors base their buying and selling decisions on real-time market data. Of course, price fluctuations occur for many reasons — time of day, news alerts, and internal analyses are just a few to name. However, the vast majority of traders simply will not execute an order based on stale information. Thus, timely updates are an essential tool for any serious trader looking to stay competitive and maximize profits.
Floor Price Decrease
The value of an NFT can fluctuate for a variety of reasons. While a sudden decrease in an NFT’s floor price may be alarming, it is not necessarily indicative of a problem. Many factors contribute to an NFT’s value, and these can change rapidly.
NFT prices could continue to drop after a project sell-out. This means that buyers could have gotten the NFTs for an even lower price. For those looking to unload their items, this also means selling at a loss.
If the floor price of an NFT project you have invested in appears to be decreasing, it is essential to research the possible reasons behind this decrease in value before selling. By understanding why the price is dropping, you can make more informed decisions about whether or not to sell.
Floor Price Increase
If a project’s floor price has risen, it can be due to several factors — or nothing at all. Brilliant work on the NFT’s roadmap, a new partnership announcement, or a successful utility could all lead to a temporary price increase.
However, it could also be that the price increase is a result of market manipulation by whales (large investors) or a pump and dump scheme. The best way to see if a project’s price increase is legitimate is to read the project’s latest monthly report or quarterly report.
How are NFT Floor Prices Calculated?
The NFT market is quite volatile and difficult to predict. As a result, the value of different NFT projects may be affected by speculation.
The NFT floor price however is determined by the creators of the project. The owners create a “floor price” for their asset — the minimum amount they’d accept in exchange for it. This means that NFTs act just like traditional stocks wherein their market value reflects how much another person is willing to pay for them.
When considering the value of an NFT project, it is important to remember that there are a variety of factors at play. In addition to the floor price, things like an asset’s programmable rarity, subjective readings of the project’s community, and its history all play a role. More technical metrics can be used to determine the percentage of a project’s supply that has been listed over time, which is a signal of how many motivated sellers there may be. Ultimately, when trying to assess the worth of an NFT project, it is important to look at the big picture.
Factors that Drive an NFT’s Value
NFTs are still a new asset class, and determining a definite value can be difficult. However, there are a few different indicators that can be used to help assess the value of a particular project.
Rarity
Rarity is one of the key factors in determining an NFT’s value. Rarity can be defined in a few ways:
· RARITY OF SUPPLY – there are only so many tokens that will ever be available, limiting the amount of supply.
· TIMELINESS – this applies to NFTs that are released at certain times and events, or have a certain time window in which they can be obtained (think limited edition collectibles).
NFTs are all about the ownership experience. Because NFTs can be acquired in different ways, it’s up to that individual or company to decide how others may use or transfer their unique assets. This leads to very personalized experiences for both owners and users.
Utility
NFTs have a range of potential applications in both the physical and digital worlds. The utility of an NFT comes from its ability to be applied in real-world scenarios. This makes them valuable for several different purposes.
For example, businesses can use them to reward users or give them access to different services and experiences, affordably rewarding high-performing employees without adding to a company’s expenses.
Ownership
NFTs are a new way to establish ownership of an object. Unlike traditional methods, NFTs make an object unique and highly sought after. The value of an object with an NFT attached to it is based on its usefulness, rarity, and the personal enjoyment it provides users.
NFTs are similar to cryptocurrencies in the sense that neither can be duplicated for free. The main difference is that NFTs are not strictly digital. NFTs are transferable ownership licenses similar to a digital rights management agreement. They can represent anything from unique digital assets like CryptoKitties, to traditional things such as art, real estate, and even physical locations.
An NFT with tangible value is best suited for short-term trading, as its use is time-sensitive, like a coupon. On the other hand, digital assets that are part of a limited collection will gradually become more valuable over time as the number of tokens available decreases.
What is an NFT floor sweep?
Trading NFTs is exceptionally common in the digital collectibles space, as it allows users to purchase rare items and recoup their funds if they’re no longer interested. This phenomenon is known as a “floor sweep,” which occurs when one user purchases all of the NFTs in a project at its lowest price. That buyer can then sell their newly acquired NFTs at the new floor price, earning a quick profit.
Since the floor sweep phenomenon is so prevalent, it’s a good idea to seek out a marketplace where NFTs are auctioned off regularly.
Floor sweeps happen because projects with high NFT ownership tend to increase in value, which can drive the price up enough for investors to want to sell. However, executing a floor sweep can be risky, as the price could fall shortly after the sweep. If NFT ownership is low, it may take users a long time to find a buyer for their NFTs.
How To Avoid Floor Price Manipulation
When it comes to investing in NFTs, many newcomers may be tempted to buy the floor. However, it’s important to be aware that the floor price can be manipulated.
NFT projects that are bought by a single person or group at a high price can often be artificial and without significant community support. In these cases, the project may have been created solely to raise the floor price and value of the collection. Be wary of investing in these types of NFTs.
It is important to do your own research before purchasing an NFT. Checking the transaction history and reviews from other buyers can help you assess the long-term value of the project. Additionally, joining the project’s Discord and Telegram groups can give you insights into the legitimacy of the community. By doing your due diligence, you can avoid falling victim to floor prices manipulated by a sweep.
Choosing an NFT Floor Price Tracking Tool
NFT collectors, crypto traders, and entrepreneurs often struggle to track NFT floor prices and find ideal selling opportunities. This can be due to a lack of understanding of why this is important, or because the process of gathering all the necessary data is inefficient and difficult. By tracking NFT floor prices, you can more easily identify rare tokens that are undervalued and then sell them for a profit. To do this effectively, you need to have access to accurate and up-to-date data.
NFT prices are volatile and constantly changing. To keep track of these prices, you need a good NFT floor price tracking tool. These tools help you identify winners quickly and monitor your collection’s value over time. With a good tracking tool, you can easily stay ahead of the game and profit from your NFTs.
Finding NFT Floor Price Charts to Track Collections
There are a few key criteria to consider when choosing an NFT tracking tool. Speed and frequency of data refresh are important to avoid missing any NFT launches. The tool should also have a large number of collections available to prevent any data gaps or missed information. Other valuable features to look for include watchlists, price alerts, portfolio tracking, market valuations, and indexes. Finally, decide whether you’re willing to pay for the tool or if you prefer a free solution.
FLOLiO
FLOLiO is your go-to source for information on all things related to NFTs and Web3. Not only is FLOLiO a great resource for keeping up with the latest news and developments in the world of NFTs, but it’s also an invaluable tool for tracking floor prices on NFTs.
Whether you’re a seasoned investor or just getting started in the world of NFTs, FLOLiO is the perfect place to go for accurate and up-to-date information on all things NFT.
FLOLiO allows you to see the most accurate account holdings for your NFTs using Floor, Trait Floor, and FMV. The platform pulls information from DUNE to provide NFT-ETH Holder Distribution. It also shows top holders, the number of unique owners, volume, and listing prices in addition to the floor price. This information is vital in choosing to purchase or even sell your NFT.
Where Can You Check The NFT Floor Price Chart & History On FLOLiO?
You can easily locate the floor price of an NFT collection on FLOLiO in two ways. One way is to click on products then choose explore and select the collection you’re interested in or if you are looking for the floor price of a specific collection, simply enter the name of the NFT collection in the search bar and you’ll see the floor price visibly displayed.
Conclusion
The future of NFTs is impossible to predict — but that doesn’t mean you should leave it to chance. As the blockchain industry continues to grow, rely on proper research and careful analysis when investing in NFTs.
As the NFT market fluctuates, there are plenty of factors that can drive the floor price down, including lower supply and a rampant amount of buy orders, for example. So it’s important to do your own research before buying an NFT — and particularly important to remember that NFTs are just like any other cryptocurrency — never invest more than you’re willing to lose!
