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How does the price of NFTs increase, and what determines their value over time? A descriptive guide to the Non-Fungible Token market.
The price of NFTs over time: between the mint and resale price
The Non-Fungible Token market peaked in 2021, when many referred to it as a “bubble,” remaining at $9 billion in total NFT sales at the time of writing.
Staggering figures may raise questions about how such a market works. And indeed, to understand the performance of NFTs, one would need to analyze what their price and value over time are based on.
Among the various market factors that determine the price and value of an NFT are the mint price and the resale price.
First of all, NFTs are tokens minted on Blockchains such as Ethereum, Polygon, and Solana, where the initial creators of NFTs faced different mint fees based on the blockchain they used and also based on the value of the reference cryptocurrency, which is well known to fluctuate over time.
Not only that but once an NFT has been minted and sold for its first time, it can then be resold on a marketplace at a price determined by the seller. The seller’s first price in question is called the minimum price (or floor price).
Most NFT marketplaces list the floor price, so you know the minimum investment to enter that collection.
How the price of NFTs increases: the law of the market.
Just as the law of the market teaches, for NFTs, the increase in price comes from the rise in market demand and the decrease in supply.
In practice, NFTs gain value when buyers can sell their NFTs at a higher price than they paid.
Not only that, just as with cryptocurrencies, a collection of Non-Fungible Tokens increases in value when market demand increases and the overall supply of NFTs available for sale decreases.
To give an example, the famous Bored Ape Yacht Club (BAYC) collection, when they were first mined, they were selling for not even 1 ETH, compared to the current floor price of over 83 ETH on OpenSea.
There is an increase/decrease in the value and price of NFTs precisely because there is a market for them, namely, a buyer willing to pay a higher/lower price for the NFT in question. Put another way: an NFT is worth what a buyer is willing to pay for it.
DappRadar’s NFT market statistics
By following the aggregate statistics on DappRadar, we can obtain other valuable data to understand the price and value of the NFT or NFT collection we are interested in.
First, DappRadar presents a list of Blockchains most commonly used to develop NFTs beyond the three mentioned above, such as WAX, BNB Chain, Flow, Tron, Tezos, Avalanche, Zilliqa, and many others.
Not only that, by selecting filters, you can also find out which are currently the top 3 collections in terms of market cap, trading volume, number of traders, and number of sales:
- Axie Infinity on Ethereum and Ronin;
- CryptoPunks on Ethereum;
- BAYC on Ethereum.
You can do the same thing by filtering the marketplaces and finding that OpenSea, Axie Marketplace, and CryptoPunks are the top 3 NFT marketplaces by exchange volume and number of traders.
The Hype on Non-Fungible Tokens
Another not insignificant indicator is the hype created around a particular NFT, creating additional value based on increased interest that can then justify raising its price.
Some hype can be considered speculation games, while others are based on true one-of-a-kind digital works without going into specifics.
For example, when it was launched, Logan Paul’s collection of NFTs attracted so much interest that it sold $1 million worth of NFTs in 30 minutes and $3.4 million on the first day.
The project was soon accused of copying Adobe’s stock photos and has been the subject of controversy ever since.
Other striking events in this niche market have been sales of digital artwork, such as the record $69 million sale of the NFT mint by artist Beeple.
In this regard, just this week, the global auction house Christie’s, which hosted the record sale, launched its Christie’s 3.0 platform specifically to devote itself entirely to NFT sales.