The term "floor price" in the NFT world refers to the lowest available price at which one can purchase an NFT from a specific collection at any given time. This figure is accessible by clicking the “Buy Now” option. Often regarded as the benchmark for assessing a collection's overall worth, this metric, however, doesn't paint the full picture.
The "Buy Now" feature can sometimes present varying prices for tokens of the same quality. Why does this happen and how to use it to your advantage?
Beyond the floor price, consider rarity, utility, and project potential in your purchase decision. Remember, it's the buyers who shape the market. For instance, a green bear from the Okay Bears collection is valued precisely at what buyers are willing to offer for it, and not a penny more.
What Determines the Floor Price of an NFT?
The floor price is influenced by market supply and demand dynamics, but several specific factors directly impact it:
- Initial Pricing. The creator sets the floor price upon the collection's debut on the marketplace.
- Resales. Subsequent sales of an NFT are reflected in the "Buy Now" price for all collection items.
- Withdrawals. Removing a listing from an auction eliminates its influence on the collection's floor price.
- Marketplace Policies. Floor prices can differ for the same token across various platforms.
Why the NFT Floor Price Changes
An increase in demand for collection NFTs, with buyers willing to pay more, drives the floor price up. Conversely, it drops when the collection expands with new releases, a direct result of supply and demand dynamics.
However, speculative activities can also sway the floor price, with investors sometimes buying up low-priced NFTs to artificially inflate it. Seller manipulations, including wash trading—reselling among the same wallets—have been spotted on some platforms like LooksRare.
Manipulation also takes the form of "Sweeping The Floor," where a major investor buys out an entire collection to later list it at a significantly higher minimum price. Competing against such a player is futile, presenting buyers with a dilemma: overpay or wait for a price drop.
Moreover, the NFT floor price is subject to:
- Project Popularity. High-demand projects command higher floor prices.
- Rarity. Unique attributes, such as rare traits in the Bored Apes or a special item in a Pudgy Penguin, elevate the floor price, influencing the overall collection's baseline.
- Token Utility. NFTs granting access to exclusive games, memberships, or benefits can warrant a premium floor price.
- Market Trends. Bearish markets typically depress, while bullish conditions buoy NFT floor prices.
Can You Buy an NFT Below the Floor Price?
It's feasible with these strategies:
- Market Research. Compare similar NFTs across collections and platforms to find price variances, sometimes up to 15-20%.
- Bid Below Floor. Submitting offers under the floor price can succeed, particularly for uncompetitive listings.
The price visible in the "Buy Now" window often doesn't reflect the collection's true value, being more indicative of the current market sentiment.
