If you are evaluating the intrinsic value of a non-fungible token (NFT) in a collection, you may consider several metrics. One is called the floor price, which is usually denominated in cryptocurrencies or in stablecoins pegged to the U.S. dollar.

The number refers to the minimum price a seller wants for an NFT in any given collection. But the usefulness of floor prices is somewhat more complex – and the metric can be manipulated to make a collection seem more popular than it is.

OpenSea, the largest NFT marketplace, defines the floor price as “the lowest price for collection items, rather than the average item price.” The metric is updated in real time as sales of NFTs in a collection roll in. The calculation of a floor price typically doesn't include Dutch auctions, where the price of an NFT is reduced until someone is willing to buy it.

The floor price is often a good starting point for understanding the popularity of an NFT collection and its perceived value over time. Collections with a high floor price might be more popular, and dips in floor price might signal that interest in that project is waning.

For instance, as of this writing, the floor price for an NFT in the wildly popular Bored Ape Yacht Club (BAYC) collection on OpenSea is 74.7 ETH, or about $89,450. The floor price of a collection can vary slightly by platform – for example, on Rarible, the floor price for BAYC is 72 ETH (about $86,200).

Because the floor price sets the bar for the value of an NFT within a collection, many NFTs with rare traits will sell for more than the floor price. Ape #8552, which features rare traits like gold fur, sold for 95 wrapped ether (wETH) in July 2021 (worth about $241,470 at the time).

The discrepancy reveals something inherent to non-fungible tokens: Although they may be part of a collection, each digital asset is unique and can sell for varying prices, depending on rarity traits or features specific to an individual token. Fluctuations in market conditions can also affect floor prices.

In addition, the term floor price is sometimes used to refer to NFTs grouped by trait. So, someone might say that the floor price for a gold Ape is higher than others, and so on.

It’s pretty easy to find the floor price for a collection. On OpenSea, you can click on an individual collection, and it will show the floor price data next to the collection’s total sales volume and the best offer made by a buyer. On the analytics tab, you can view the project’s floor price over the period of a week. Tools like Nansen’s NFT Paradise or CryptoSlam also provide easy access to floor prices, and Gem aggregates floor prices across different platforms.

The floor price simply determines the lowest asking price for a given NFT collection. But that doesn't mean that collectors are willing to buy at that price – or that an NFT is really worth the floor price if you buy it.

Data from Nansen’s NFT Paradise analytics tool helps to illustrate this. Tamadoge Common, an NFT project that was released in October 2022, had a floor price of 200 ETH (about $311,500) on Oct. 24, 2022. That price meant that the owners of the NFTs weren't willing to part with their NFTs for less than 200 ETH. At the time, the trading volume was just 12 ETH, suggesting that no buyer was willing to match the floor price. As of December 2022, the collection has done about 22 ETH (about $26,350) in total sales volume, according to OpenSea, and the floor price is hovering at around 0.2 ETH (about $240).

Now, does that mean that a Tamadoge Common NFT was worth 200 ETH? Not really. Even if you bought it, all the market knows is that you thought it was worth 200 ETH at the time, though you may struggle to find another buyer at that price if you decide to sell.

Just as relevant to collectors is the best offer price, which refers to the maximum amount that other traders are willing to pay for an NFT in the collection. Like a floor price, this figure is constantly updated to reflect the most recent highest offer made by an interested buyer. The difference between the best offer price and the floor price is like a spread in a cryptocurrency trade.

It’s important to note that only those who hold NFTs in a collection can set the floor price. Those who set the floor price aren't necessarily reliable arbiters of value. Indeed, they may be working to deceive buyers.

Those who hold NFTs may work together to artificially raise the floor price of a collection by refusing to sell for anything less than an agreed price. For example, if I conspired with other holders of a particular NFT collection to not sell our NFTs below 100 ETH, even though that number is artificially inflated beyond the collection's actual value, we could deceptively increase the floor price.

Related is a term called “sweeping the floor,” which refers to the act of purchasing multiple NFTs in a collection at its floor price. If a buyer sweeps the floor, it may imply that the project is gaining momentum, though it could also signal an effort by a single entity to manipulate the floor price.

Another form of manipulation is called wash trading, where the buyer and seller in a transaction are the same or collude together. For example, an owner of a BAYC NFT might list that NFT at an inflated price and buy it back himself.

Ultimately, floor price can be a useful tool for NFT traders to understand if a collection is gaining popularity and what the entry point is for buying an NFT in that collection. It’s important, however, to exercise caution and look at multiple data points to make an informed decision.