You can take into account a number of factors when determining the intrinsic worth of a non-fungible token (NFT) in a collection. One of these is the floor price, and it is typically expressed in cryptocurrencies or stablecoins.
The number represents the lowest price a seller is willing to accept for an NFT in a specific collection. However, the value of floor prices is a little more complicated, and the metric can be used to inflate a collection’s popularity.
The floor price is frequently a good place to start when determining how well-liked an NFT collection is and how its perceived value changes over time. Collections with a higher floor price may be more well-liked, whereas drops in the floor price may indicate that a project is losing support.
For example, the floor price for an NFT in the massively popular Bored Ape Yacht Club (BAYC) collection on OpenSea in December 2022 is 74.7 ETH, or approximately $89,450. A collection’s floor price may differ significantly depending on the platform; for instance, on Rarible, BAYC’s floor price is 72 ETH (or around $86,200).
Numerous NFTs with rare attributes will sell for more than the floor price since the floor price establishes the threshold for an NFT’s value inside a collection. Ape #8552, which has uncommon characteristics including gold fur, sold for 95 wrapped ether (wETH), or about $241,470 at the time, in July 2021.
The difference reveals a characteristic of non-fungible tokens: Each digital asset is distinct and can sell for a variety of prices depending on its rarity traits or other unique attributes, even though they may be part of a collection. Floor prices may fluctuate according to changes in the market.
Additionally, The term “floor price” is sometimes applied to NFTs classified by trait. As a result, someone can claim that the floor price for a gold Ape is higher than other prices, and so forth.
Finding the floor price for a collection is not too difficult. You can click on a specific collection on an NFT marketplace, and it will display the floor pricing information alongside the collection’s overall sales volume and the best offer received from a buyer.
Is the floor price metric reliable?
Simply said, the floor price establishes the lowest possible asking price for a specific NFT collection. But that doesn’t mean that collectors will buy at that price, or that if you buy an NFT, it will actually be worth the floor price.
For example, the floor price for Tamadoge Common, an NFT project that was launched in October 2022, was 200 ETH (about $311,500) on October 24, 2022. With that asking price, it was clear that the NFT owners would not sell their tokens for less than 200 ETH. Only 12 ETH were being traded at the moment, which indicated that no one was ready to match the floor price.
Do these figures imply that a Tamadoge Common NFT was worth 200 ETH? Actually, no. Even if you purchased it, all the market knows is that you believed it to be worth 200 ETH at the time. If you wish to sell, however, you might have trouble finding a buyer willing to pay that amount.
The best offer price, or the highest price other traders are prepared to pay for an NFT in the collection, is also important to collectors. This amount, which functions similarly to a floor price, is regularly adjusted to reflect the most recent highest offer made by a prospective buyer. In a cryptocurrency trade, the spread is similar to the difference between the best offer price and the floor price.
Keep in mind who sets the floor price
It’s crucial to remember that only people who own NFTs in a collection are permitted to decide on the floor price. The ones who determine the floor price are not always trustworthy judges of value. They might be attempting to trick customers, in fact.
NFT owners may collaborate to raise a collection’s floor price artificially by refusing to sell for less than a predetermined amount. For instance, a group of owners may deceitfully raise the floor price of a specific NFT collection if they agreed not to sell their NFTs for less than 100 ETH, despite the fact that this amount is artificially inflated above the collection’s true value.
To conclude, one of the key metrics for determining the value of an NFT collection is the floor price. But we must never rely on it solely. Considering how unstable the ecosystem is, determining the fair value of NFTs is a difficult undertaking.
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Disclaimer: The information herein is for educational purposes only and should not be considered financial, investment, or trading advice. Please conduct your own research and due diligence before making investment decisions. You understand that you are using the Information provided at your own risk.