The issue of how to set a price for one’s creative work is not something limited to the digital realm such as NFTs. Naturally, the price is determined by the market. While value is subjective in some sense and can have a sentimental element, the reality is that the market is the ultimate arbiter of truth from a monetary perspective.
Did Beeple really know that his ‘Everydays: The First 5000 Days’ piece would sell for US$69 million? Surely not.
How do you go about figuring out what the market will pay for your work? This is a problem that has faced all sorts of creators since the beginning of time.
And why do some pieces or collections fall completely flat – as in nobody on earth is interested? Most NFTs sell for between US$1 and US$900.
The interesting question then is what are the strategies aspiring artists and creatives can employ to optimise the prospects that their piece strikes gold? Pricing is surely but one of the many things they need to do to get it right.
Spoiler alert – there is no ‘magic formula’. Instead, we can explore some guidelines and basic principles to help illustrate how one could gain an edge in terms of achieving success. There are no guarantees, only probabilities. The goal is to try and stack the odds in your favour.
So let’s get down to that – how to stack the odds in your favour from a NFT pricing perspective to maximise the prospects of your collection going to the moon. Or at least fairly close to it.
How much does an NFT cost?
As noted earlier, most NFTs cost between US$1 and US$900. Unfortunately, that’s hardly going to set the artist off into the sunset to enjoy a peaceful retirement.
However, there’s something crucial to consider before proceeding. When you decide to mint the specific NFT, you need to consider the blockchain that you’ll be using as this can be seen as your production cost (as well as your time). The Chainsaw actually put together a useful article on how to go about minting an NFT, so check that out if you’re keen to get clued up.
These input costs must be taken into account in determining the price you are looking to achieve for your NFT. NFTs are minted on blockchains like Ethereum, Solana, Tezos and numerous others.
There is no single fee that applies to any blockchain or minting of a specific NFT. The price fluctuates wildly depending on demand for space on the blockchain. It can cost anywhere from US$1 to US$1000 at peak times.
Stoner Cats television series NFTs turned out to be a disaster last year as users spent US$700,000 in minting fees, some 300 ETH. Congestion was cited as the problem so know what you’re getting into and check out demand for the block space.
Also, remember to take into account seller fees when setting your price. On average between 2.5 – 5% of the total sales price will be payable to the NFT marketplace, depending where you sell it. Other typical fees you’ll be charged include:
- Account fees – varies and depends on which NFT marketplace you choose; and
- A listing fee – payable when listing your NFT on a marketplace.
Alright, so the point is simple – remember to take into account minting and all other fees when setting the price of your NFT.
How is an NFT price determined?
There are plenty of factors that potentially go into determining the value of an NFT. Some belief that social proof is one of them – celebrities think they are cool, it must therefore be so! But it’s not always the case, as some celebrities have made terrible NFT investments that have gone close to zero.
There’s plenty of debate, and there’s no single right answer. However, three common themes seem to emerge when people speak about determining the value of an NFT. These are the factors that most, but not all, people seem to agree with.
Before diving into the details, it’s worth noting that these three factors are only relevant in the context of an individual, artist or brand releasing an NFT. Without some marketing efforts, community-building, storytelling or social clout, these factors alone are unlikely to have much impact on the price.
Rarity is one of the factors impacting price. Some creators go the one-of-one route meaning there is only a single NFT. Others run limited collections of 1000 or 10,000 for example. Within the collections themselves each NFT will have different traits that impact its rarity within the collection.
These traits include things like colour, design or physical characteristics.
If we turn to the World of Women (WoW) NFT collection, check out WoW #7089 below.
Notice the characteristics of WoW #7089 beneath. This is what is meant by ‘rarity’ in NFT circles.
Number of NFTs in the collection
The number of NFTs in the collection can, but not always, have an impact on price. Is the NFT a one-of-one unique piece or are there multiple editions of the same work?
All things equal, a one-of-one NFT is likely to be more valuable than one from a collection. Scarcity is the name of the game and can have a major influence over the price. The more editions in a collection, the lower the price, in general. But not always!
The more utility an NFT has, the more likely it is to attract a higher price. Utility can be extended to both the physical and digital realms, both commercial and non-commercial. Not all NFTs permit the owner to leverage the intellectual property elsewhere, a controversial topic The Chainsaw has previously covered here.
However where commercial rights are permitted, it enables holders to use it for their own creation. To illustrate, consider the Bored Ape Yacht Club (BAYC) which gives owners full rights over the images and therefore the ability to use them commercially as they please.
Several examples have sprung up where entrepreneurs have leveraged the BAYC brand.
Launched by food entrepreneur Andy Nguyen, Bored & Hungry opened in Long Beach California in April 2022. Nguyen spent US$267,000 purchasing Bored Ape #6184, including two Mutant Apes, receiving full IP ownership rights. Accepting additional payments like ETH and $APE coin, the restaurant was initially planned as a 90 day pop-up, but due to its popularity, remains open as a full-time burger joint and has since expanded to Miami.
In other contexts, NFTs could take the form of avatars or in-game items in online games. Decentraland offers an example of a game that enables holders to participate by virtue of ownership of virtual terrain and its own token.
Bottomline here is that if it has utility, an NFT is more likely to be valuable and attract a higher price, but as mentioned before, in the absence of a brand or marketing effort it is unlikely that these three factors alone will impact the price very much.
What is ‘floor price’ in NFTs?
Simply put, it is the lowest sales price for an NFT within a collection. This is updated in real-time, as the floor price changes with every NFT listed or sold – remember, NFTs trade 24/7.
Why does floor price matter? It’s a good barometer for the value of a NFT collection. All things equal, the higher the floor price of an NFT collection, the better the signal that it is a high value NFT.
At the time of publication, the floor price for the most valuable NFT collection, the BAYC, is 66.9037 ETH or US$86,169.61.
It’s worth also remembering that the vast majority of NFTs have trivial floor prices, as low as 0.01 ETH in some cases – this of course reflects the fact that they aren’t in demand.
What is ‘mint price’ in NFTs?
The mint price refers to the cost at which an NFT was minted by its first-ever holder. All NFTs were once minted from a smart contract, usually at a cost excluding gas fees.
BAYC had a mint price of 0.08 ETH, consistent for all NFTs in the collection, irrespective of rarity.
Surprisingly, CryptoPunks could be claimed by anyone with an Ethereum wallet and minting took place at 0 ETH. The current floor price for CryptoPunks sits at a whopping 65.47 ETH or US$84,328.08. Quite the valuable pixelated JPEG.
NFT price cycle
NFT pricing is a strange one for newbies to get their head around because it is priced in crypto. And then of course the crypto is in turn priced in fiat currency, usually US dollars.
So you can have a situation where the crypto value drops but the dollar value retains, and vice versa. Sounds a little weird? Let us explain the two major factors that influence NFT prices.
Price of the base asset
As noted, the price of an NFT is denominated in crypto, most often ETH but sometimes SOL and others tokens.
As markets fluctuate, the demand for NFTs goes up and down, meaning that the asset’s value in crypto terms fluctuates. One of the easiest ways to spot this is by following the floor price of an NFT collection which changes based on market conditions.
Crypto market trends
The other side of the coin is that aside from the value fluctuating in crypto terms, it will also change in fiat currency terms based on the value of the underlying crypto.
For example, let’s assume you have an NFT priced at 1 ETH that retained its value over a period of time. That NFT would be valued differently in US dollar terms on any single day (or minute) since crypto fluctuates and trades 24/7.
Other factors that impact NFT price
As noted above, other factors play into the price including social proof, hype, marketing, speculation, to name a few. Plenty of NFTs are rare, purport to have some utility and artificial scarcity – but for a range of reasons nobody cares.
This isn’t too surprising as OpenSea, the biggest platform has itself admitted that 80% of NFTs breach the marketplace’s own terms and conditions (most often copyright).
What is the most expensive NFT?
Some of the most expensive NFTs ever sold include Crypto Punks, BAYC and Proof Collective. Some are one-of-one NFTs and others like those above are part of a collection. The one that takes the cake though is ‘The Merge’.
With a whopping price tag of US$91.8 million and changing hands on the Nifty Gateway platform, The Merge smashes the record for a publicly sold artwork by a living artist.
Notably however, the NFT was not bought by one, but rather 29,983 people, so “the Merge” sold out after being split into 312,686 coins distributed to buyers.
So, how do you price your NFT?
Assuming you are going about creating one, these are the factors to take into consideration before you get cracking.
Launching in a bull market can generate up a lot more revenue than launching in a bear market. No further explanation needed here.
One can charge a premium for a unique offering that stands out from the competition.
How are you going to drum up excitement? Many use social media as a litmus test to analyse interest and demand. People generally will pay high prices when NFT projects have lots of engagement and social proof on platforms like Twitter.
Can you get a celeb or influencer involved? If so, that is a great way to generate social proof.
If the market loves your collection, royalties earned via secondary sales could potentially justify offering a free mint right off the bat.
NFTs are just like any other products. Compare prices for similar NFTs on marketplaces like OpenSea and consider matching them to gain a competitive edge. Unless of course you believe you are offering something better.
Take into account other costs involved in minting, listing and selling the NFT, as well as the question of royalties. These all can play into your decision as to how you price an NFT.
What’s the best starting price for your NFT?
Artists selling their work for tens of thousands of dollars can be very misleading for a newbie entering the NFT space. The sale of these creations isn’t necessarily guaranteed at all, never mind the fact that those that achieve high prices probably have some sort of reputation or marketing machine behind them.
A strategy worth testing is to set low prices, convert some sales, and then increase your prices over time. When sales become more frequent and consistent, this is your cue to raise the floor price.
“Make some sales, and then take your pricing up over time. As you continue to sell more frequently and consistently, raise your floor. Sales are your proof of concept.“Sophie Sturdevant, Chicago-based artist
Alternatively, start higher, suss the level of interest and move downwards as buyers start nibbling.
Bringing it all together
When it comes to the science and art of NFT pricing, there are a lot of good resources out there to uncover.
The best way to look at them is a roadmap. It’s not a formula guaranteed for success. Much like creatives who produce physical works, digital artists find it equally difficult to gain traction and make a living. Sometimes it’s pure talent, other times luck and often, it is a combination of the two.
Whatever one’s reason for creating an NFT, it’s worth doing some work upfront on pricing strategies to optimise the prospects of success. And what better way to start but by learning from those who have already paved the way.