If you have recently started exploring and reading about NFTs, it’s highly likely that you may have come across the term floor price of NFT. It is one of the most crucial factors for collectors and investors through which they consider the intrinsic value of the NFT.
Generally speaking, floor price NFT is the lowest possible amount one can spend to purchase an NFT or become a digital asset owner. This is usually determined in stable coins or cryptos pegged to USD. Keep reading to learn more about NFT floor pricing and what factors help evaluate it.
What Is Meant by NFT Floor Price?
Usually, people consider an average price when it comes to purchasing goods. However, when it comes to NFTs, floor pricing plays a significant role in collection items.
One of the easiest and basic definitions of it is that it is the lowest value of NFT set at the time of minting by the creator for the buyer to be the owner. It is pertinent to understand that an NFT is considered popular by its floor price only.
Digital NFT collections with a high floor price tend to be more popular, whereas those with lesser floor value are considered less popular, and ultimately, the interest of the investor decreases.
Essential Factors for the Valuation of NFTs
If you are new to the NFT market and have yet to learn how the pricing for NFTs works, this guide is for you. Below are some factors that help determine and consider the value of NFTs. These include the following
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Utility
In the NFT context, utility refers to what an NFT provides in the real world. For instance, some NFTs are known to provide services and physical goods, while others might offer memberships, etc.
The amount of utility offered plays a significant role in determining the floor price of an NFT. This occurs when investors differentiate the NFTs with actual perks against those without.
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Ownership History
The blockchain keeps a track record of everything. Knowing the ownership history of an NFT is essential information that plays a role in influencing the value of the asset.
The creator and owner details are easily found on the blockchain and the token, where ownership history details are available.
As a result, any NFT that has a history of more previous owners may have higher NFT floor prices as opposed to those that don’t.
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Liquidity
Liquidity tells us how quickly an asset can be sold or converted into cash. NFTs are less liquid than bitcoins, so the ability to sell one quickly makes NFTs more popular and increases their demand.
This increased demand tends to make the NFTs more liquid, boosting the floor price’s value.
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Future Value
Future value plays a vital role in figuring out what the floor price of an NFT can be. Future value and floor price go hand in hand. Hence, if the holders feel there will be an increase in the future value, the floor price can also go up.
The news regarding any upcoming projects can determine the speculation of future value. Such information directly impacts the demand and supply of the NFT. Where owners can take off their assets from the market, resulting in an increase in demand and a shortage of supply. Thus, the floor price upsurges.
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Social Behavior
Humans have this element in them that whenever they see a trend or an action of the majority following a particular thing, they want to be a part of the same too. Such is also the case with NFTs.
If there is a considerable demand and more people are interested in purchasing the NFT, it will create social behavior. This ultimately impacts the floor price of NFTs. As a result, most NFT owners will view it considering the proof of social behavior.
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Scarcity and Rarity
Whether it is an NFT marketplace or any other, scarcity and rarity of any product drive up the demand. NFT rarity rankings play a huge role in the floor price. The more unique your NFT is, the higher the floor price.
The idea of NFTs is to showcase something special and rare. This is why the entire focus is not only on creating something like that but also on marketing it in a way that serves the purpose.
If someone sells an NFT that is common or easily attainable, the floor price will automatically be lesser.
Who Sets the Floor Price?
Now that we know the factors that determine the value of an NFT floor price, it is important to understand who sets the floor price
The point worth noting here is that NFT holders are the ones who have the authority to set the floor price. Of course, it is also likely that NFT owners can manipulate the collectors to artificially increase the floor price by taking control over selling at a price below the agreed one.
For instance, various NFT holders of a particular collection can gather up and decide that they won’t sell an NFT below 200 ETH – a number created artificially which is way over the actual worth of the collection. This may result in increasing the floor price.
Another way to manipulate the floor price is where the buyer purchases various NFTs of a collection at the desired floor price. Which reflects the ‘social behavior’ that a particular collection is popular amongst the rest.
Hence, the buyer sweeps the floor. Here, a single entity, i.e., the buyer, works the floor price.
Conclusion
Purchasing an NFT at a floor price isn’t an idea that is considered wrong. However, several factors determine the market value of an NFT floor price.
They can be new investors, developments in a project, or news of any upcoming project. Or any artificially created hype which various methods can easily manipulate for setting up an NFT floor price.
Therefore, one must research and read thoroughly before purchasing an NFT, even if it is at its floor price, to sell off the NFTs through famous platforms like HenriPay.
