For anyone looking to become an NFT collector or start trading collectible non-fungible tokens, it's essential to first get acquainted with one very basic, yet crucial rule of the NFT world.
In this comprehensive guide, we will explain what an NFT floor price is, how to calculate it, and why it is so important for market participants.
Introduction to NFTs
If you're ready to embark on an exciting journey into the world of NFTs, we suggest starting with the basics and gradually moving on to more complex topics.
What are NFTs?
Let's start by learning the main term of this article. So, NFTs, or non-fungible tokens, are unique digital assets stored on the blockchain. They cater to a wide range of investors because they can exist in various forms, such as images, videos, music, in-game items, or even tweets.
But what makes NFTs unique? The answer lies in their definition. As we've established, these tokens are stored on the blockchain, meaning they have their own record there. This means that such a digital asset cannot be forged or duplicated.
This is what makes non-fungible tokens so attractive to investors and collectors. By purchasing NFTs, they gain the ability to own and trade rare and valuable digital assets.
Why have NFTs become popular?
The NFT sector is no longer at the peak of its popularity, according to data from The Block. NFTs have seen a decline in popularity due to market saturation, speculative bubbles bursting, and waning public interest as the initial hype faded.
NFT trade volume by chain during last year. Source: Cryptoslam
As we can see, the trading volume of non-fungible tokens is currently at a relatively stable level of around $400 million, following a slight pullback from the resurgence in popularity in late 2023 and early 2024.
To assess how "alive" this sector is now, it is also necessary to consider the NFT minting indicator—essentially, how many new tokens are being created.
New NFT mints on the Ethereum blockchain during last year. Source: The Block
The data on the chart indicates that after a surge in December 2023, the number of new non-fungible tokens has decreased and is now around 5,000, compared to nearly 20,000 new issues at its peak.
However, let's consider this scenario from a broader perspective—since the inception of trading these tokens on the market in 2021.
NFT trade volume by chain since the year of 2021. Source: Cryptoslam
Here, it becomes quite clear that the absolute peak of interest in NFTs and, consequently, the trading volume of these assets was recorded in 2022, reaching an impressive mark of over $3 billion.
This success is primarily linked to the surge of interest in new technologies such as decentralisation, metaverses, and virtual worlds. The significant rise in popularity of Decentraland and The Sandbox directly contributed to this spike in trading volume. In these metaverses, virtual real estate and other assets were presented in the form of non-fungible tokens.
However, usage in metaverses is far from the only application of NFTs. Precisely because these tokens have found their way into numerous different sectors, they have become so popular. Here are just a few scenarios for their use:
Gaming. In this realm, NFTs can serve as in-game currency, items, artefacts, characters, or even entire locations and worlds. They have become so sought-after that a new gaming genre has emerged as a result—NFT games.
Digital ownership. NFTs have, for the first time, allowed people to truly own something on the internet. Often, anything that appears on the web becomes part of the public domain, making it nearly impossible to trace the original creator or owner of the content. This is where NFTs come to the rescue, as they essentially act as digital certificates of uniqueness and authenticity.
Development of crypto art. NFTs have also ushered in a new era for digital artists and collectors. For creators, they offer the opportunity to experiment with new formats for their work and provide new ways to monetize and distribute their digital collectibles. As a result, these tokens have become appealing not only to traders looking to profit from a new form of cryptocurrency but also to digital collectors who value rarity and hold their NFT collections in high regard.
Understanding the floor price in the NFT world
Cheers, now we know a lot of interesting things about NFTs! This means it's time to move on to the next level and talk about much more tangible matters.
Defining floor price
So, the NFT floor price is the lowest price at which an NFT from a specific collection is available for sale on a marketplace.
This price varies significantly for different tokens, there isn't even an approximate range. To understand the extent of this price variability, just look at the screenshot below. It shows a list of five trending NFTs, with their current minimum prices listed in Ethereum (ETH) in the second column.
Trending NFTs floor price. Source: NFTGO
It's also important to note that NFTs do not have a fixed price like stocks or goods. Their market value is determined by current conditions.
1. External conditions. This includes the overall state of the NFT market, encompassing factors such as liquidity, demand, and supply.
2. Internal factors. This refers to the characteristics of the token itself. For example:
- Rarity index. The rarer the NFT, the higher its potential minimum price.
- Popularity of the project. NFTs from popular projects generally have higher minimum prices.
- Utility. NFTs that have practical applications or provide access to exclusive benefits may have higher minimum prices.
Due to all these aspects, the price of an NFT can fluctuate significantly over time, both upwards and downwards.
How is the NFT floor price determined?
The tricky part is that the floor price of an NFT cannot be calculated independently or predicted. All an investor can do in this situation is to monitor it closely and regularly.
This is where NFT marketplaces and other tracking tools come to the aid of those searching. Don't worry, we will discuss these in detail further in the text.
The importance of floor price for investors and collectors
Why is knowledge of the floor price of unique tokens so important for market players? It impacts two fundamental aspects: the market value of these digital assets and the selection of the right strategy for investors. Let's break this down step by step.
Impact on market value
Firstly, the floor price directly influences the market value of non-fungible tokens. It serves as the primary indicator of the base value of these tokens, revealing how much people are willing to pay for a particular NFT at any given moment.
Moreover, it indirectly informs about the rarity and liquidity of the chosen NFT. Rare NFTs generally have higher floor prices than common ones due to their limited supply. More liquid NFTs, which are easy to buy and sell, may also have higher floor prices.
Finally, the floor price reflects the overall market sentiment—both towards a specific token or collection and the entire NFT segment. A rising floor price can indicate growing interest and demand, while a falling floor price may suggest waning interest or a sell-off.
All these factors combined provide insights into the potential profit an investor or collector might gain by investing in a particular token. Ultimately, this metric plays a crucial role for market players.
Buying and selling strategies
Additionally, tracking the floor price of these digital assets holds immense practical value when it comes to devising an effective investment strategy. Here are a few examples of how one might develop a buying or selling tactic based on an NFT's floor price:
1. Buying at a low price (playing the long game). In this strategy, investors look for assets with the lowest floor price to sell them later at a higher price when this value increases.
2. Trading on fluctuations. Here, changes in the floor price serve as indicators to determine the most advantageous moments for entering a position (buying the token) and exiting it (selling the token).
3. Arbitrage. This strategy works with NFTs much like it does with cryptocurrencies. A trader compares the floor prices of the token of interest across different marketplaces. Then, they buy the NFT on the platform where the floor price is lower and resell it on the one where the price is higher.
Important! To buy and sell NFTs, you will need a special wallet for cryptocurrencies. For information on how to set up a cryptocurrency wallet, read our step-by-step guide.
Tracking NFT floor price changes
And here we are again, returning to one of the most crucial practical questions: how do you stay informed about changes in the floor price of NFTs that interest you? Make some space in your web browser bookmarks, because we’re about to give you a wealth of incredibly useful links for this purpose.
Tools and platforms
As we mentioned earlier, one of the most useful resources is an NFT marketplace, an online platform specifically designed for trading non-fungible tokens.
The largest and most popular of these marketplaces is OpenSea. Here, you can track prices, trading volumes, and sales history to understand the value of an NFT collection. Slightly less popular but still valuable platforms include Rarible and SuperRare, which offer similar functionalities.
OpenSea website
Another must-have tool in your arsenal is NFT data aggregators. NFTGo is widely popular, providing information on prices, trading volumes, listings, and owners for various NFT collections. The same can be done on the DappRadar platform. Additionally, CoinGecko allows you to track changes in the market capitalization of NFT collections and cryptocurrencies that interest you.
CoinGecko website
Last but not least are NFT analytics tools. These platforms aggregate data from various marketplaces and provide more comprehensive insights. Some of the key ones include Nansen, Dune Analytics, and Rarity Sniper. On these platforms, you can find dashboards to track numerous metrics such as NFT rarity, owner information, market activity, liquidity, and much more.
Ethereum blockchain NFT market overview. Source: Dune Analytics
Trend analysis
However, the list of valuable resources for tracking token floor prices doesn't end here. Another extremely valuable resource is trends and sentiments within communities.
Universal platforms for tracking such hot topics include popular social networks like X (formerly Twitter), which is an excellent place to follow news and updates about NFT projects and gauge community sentiment. NFT enthusiasts will also find it useful to check out Discord. Many NFT projects have their own servers there, allowing enthusiasts to interact with like-minded individuals and learn more about various projects.
To ensure you don't miss any important events in the NFT world, it's worth dedicating time to reading reliable sources that cover events in NFTs, blockchain, and cryptocurrencies. One such source is our very own itez blog!
The future of NFT floor prices and the market
Accurately predicting the future of the NFT market is quite challenging, as this segment is still very young and continues to evolve rapidly. However, there is no doubt that fundamental indicators like the floor price of tokens will continue to play an important role.
Predictions and trends depend solely on whether the non-fungible token segment can attract and retain a new audience, as well as offer new real-world use cases.
The only tip for investors that the Itez team can offer is to keep up with all the updates and events in the fascinating NFT world together with us!
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How to create an NFT: a step-by-step guide
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This article is not investment advice or a recommendation to purchase any specific product or service. The financial transactions mentioned in the article are not a guide to action. It’s not intended to constitute a comprehensive statement of all possible risks. You should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
