What Is an NFT Floor Price?
The most simple definition of an NFT floor price is that it is the lowest price for any NFT in a given collection.
In this article, you’ll learn:
- What an NFT floor price is meant to achieve.
- The simplest way to calculate an NFT floor price.
- Additional factors in NFT floor pricing.
- Advanced ways to calculate NFT floor prices.
- How standardized NFT floor prices can bring DeFi and NFTs closer together.
NFT Floor Price Meaning
Generally speaking, NFT floor prices are an attempt for market participants to glean insight into the fair market value of an NFT project at the collection level. This helps focus an NFT buyer’s decision-making process and analysis by stripping away in-collection factors such as rarity, traits, and more.
The easiest way to calculate an NFT floor price is to take the lowest-priced NFT in a collection. For example, on Opensea, the Bored Ape Yacht Club (BAYC) NFT collection has a floor price of 72.69 ETH because that is the lowest listed price for a BAYC NFT on the marketplace.
How NFT Floor Prices are Calculated
There are a variety of ways to calculate NFT floor prices. The most straightforward way is to take the lowest value of an individual NFT in a collection, as mentioned above.
Let’s say the lowest price for a random NFT collection is $20. This makes $20 the de-facto floor price. If someone buys the NFT, the next lowest-priced NFT (an NFT priced at $30, for example) represents the new floor price, and the floor price increases to $30. If someone lists an NFT below $20, the floor price decreases to the price set by that NFT.
Expanding Past Basic NFT Floor Pricing
An NFT collection’s floor price might initially seem like a simple and effective indicator of the lowest possible value any given NFT holds. However, there are a variety of additional factors to consider when attempting to truly gauge an NFT collection’s floor price.
NFT marketplaces often have different floor prices specific to the NFTs listed on their platforms. In the screenshot of LooksRare’s BAYC collection page below, the floor price is listed as 72.69 ETH. However, additional information shows that LooksRare is matching Opensea’s floor price, and the platform’s floor price is actually 73.88 ETH. Thus, calculating a more accurate NFT floor price necessitates scouring multiple platforms to account for marketplace fragmentation differences.
Liquidity is a widely used financial term that refers to how easy it is to exchange an asset. With NFTs, liquidity refers to how easy it is to sell an NFT and exchange it for a token.
For example, consider liquid assets such as tokens and stocks. If an exchange displays a digital asset’s price, anyone can likely sell it instantly at, or close to, that price. The same is not true for most NFTs. A good NFT floor price model should account for differing levels of liquidity. One of the best ways to do this is to factor in recent NFT sales, which provide insight into both the real price and frequency of NFT sales in a collection.
Basic NFT floor pricing is easily manipulated by outliers. For example, consider a situation in which 99% of an NFT collection is trading at 10 ETH, but there is an influx of multiple NFTs listed at 3 ETH.
The NFT floor price immediately drops to 3 ETH, which, while technically true when considering how NFT floor prices are often calculated, doesn’t accurately represent the general floor price for the NFT collection. Gaining a more accurate NFT floor pricing model requires removing outliers from calculations, as they tend to divert the floor price from what it’s intended for—giving a broad view into the fair market value of an NFT collection.
Some NFT collections, often those which are low-priced, can be subject to price manipulation in the form of mass buying. Referred to as “sweeping the floor” in NFT communities, groups or wealthy individuals can make a concentrated effort to raise the floor price. In this scenario, the floor price is defined as the lowest-priced NFT in a collection as priced by marketplaces.
Another way to manipulate the price is through wash trading, where an individual trades their own NFTs. Simply put, a group or individual with enough NFTs can manipulate the price by listing their own NFTs on a marketplace for a more expensive price, and then buying them to artificially inflate the price.
Both of these methods intentionally mislead prospective NFT buyers into believing that the fair market value of an NFT is the new floor price when in reality the price is not a result of natural demand. This is harder to factor in compared to other NFT floor price factors, and requires NFT buyers to do their due diligence on NFT ownership metrics, market sales, project community, and more.
Advanced NFT Floor Pricing
Given the number of factors relevant to an NFT’s actual floor price compared to the traditional method, a number of NFT analytics projects aim to provide users with more reliable and accurate NFT floor price data.
The most common methods are listed below. These techniques are not used on their own, but are combined in various ways by different NFT data analytics projects. Thus, how projects employ these methods is important to understand.