How to Evaluate an NFT 

By Roksolana Leus
Posted January 30, 2023
How to Evaluate an NFT

Even though the average cost of an NFT is only a few hundred dollars, we’ve seen some of these assets go for some eye-watering prices. So far, the most anyone has officially paid for an NFT was $91.8 million for The Merge by Pak in December 2021. This price gap simply goes to show how steep the prices of some NFT assets can be. This makes it sometimes hard to accurately evaluate an NFT.

What is the Value of an NFT?

The valuation of a non-fungible token is determined by a couple of factors, one of which is the subjective value the asset has. Subjective value refers to the concept of an item’s value being solely determined by a person’s opinions, tastes, preferences, or ideas. Individual values might shift and change based on their whims.

All goods and commodities have a value ascribed to them in any marketplace based on the target consumer, their preferences, and their desires. It is subjectively based on them. Some visitors to an art gallery will be impressed by some works of art and assign subjective worth to them. Some of the people who enter will disagree. The same must be said for NFT art and assets. This buyer subjectivity, and hence the subjective quotient, are absolutely essential in determining the true value of an NFT. One person’s garbage is another person’s gold.

NFTs, like any other work of art, are also usually valued based on the artist’s credibility, the quality of the artwork, the energy put into the creation of the artwork, the history behind the artwork, and the artist’s popularity. Every NFT is unique, and anyone can verify its provenance and legitimacy; however, even though ownership can be changed if the NFT is bought, sold, gifted, or traded, the underlying asset itself always remains the same. In general, in-demand NFTs are more valuable.

The value of NFTs is generally decided by the free-market principles of supply and demand, as well as the rule of scarcity, which states that scarce, in-demand NFTs attract more customers and sell for more money.

Another way to evaluate an NFT is through its utility. An NFT’s utility value is entirely determined by what it’s used for. Perhaps one of the most practical and real-world instances of functionality in NFT form is with gaming platforms. NFTs can be used in a variety of ways across the NFT ecosystem, from digital property ownership to gaming to avatar ownership and so on. The opportunities are limitless, and many developers will make use of as many as possible to generate revenue for their businesses.

What Does ‘Floor Price’ Mean?

The floor price in the NFT marketplace is the cheapest amount of money you can spend to buy an NFT from a specific collection. The floor price is determined by the person owning an NFT in a particular project and selling it for a lower price than all other vendors in that project.

The phrase “floor price” was used by economists to describe the lowest price that can be paid for a product, good, or service. It is one of the most extensively utilized indicators in the NFT market to assist with project valuation. Buying an NFT at the floor price is commonly done to get the benefits and utility of ownership. NFTs inside a project that is being sold at or near floor pricing generally contain properties/traits that are not as unique or desirable and so do not contribute value.

What is Listing History?

The listing history provides essential information to NFT Buyers. The listing history will often include the asset’s initial price when it was first put up for sale, any price reductions, and any past offers that may have fallen through for various reasons. This information aids the buyer in determining how keen the seller of an NFT would be to lower their price even further or how soon they will accept a reasonable offer.

Why Are Some NFTs Not Priced?

On most NFT marketplaces, there will be some assets on the market that are not priced. This basically means that the owner is simply displaying them and has no intention of selling them yet. Don’t waste your time on these assets by inquiring about their prices and availability unless you’re willing to make a higher-than-average offer. 

Why Are NFTs So Expensive?

There is a market for expensive NFTs, much as there is for tangible collectibles like trading cards and other expensive items. The buyers are often cryptocurrency enthusiasts who grasp the concept of trying to purchase NFTs or digital items. Some NFT buyers are merely adding more assets to their portfolio to display how much bitcoin they hold, but others have a more serious interest.

How to Know if You Have an Authentic NFT

Scammers frequently build phony NFT stores by carefully replicating popular NFT marketplaces. These sites might appear to be nearly identical to the originals, fooling even the most seasoned NFT buyer into spending enormous sums of money on counterfeit artwork that is worthless. To begin, learn everything you can about the NFT you’re considering. NFTs that normally sell for hundreds of thousands of dollars will be sold for a fraction of their true value on several scam sites. You should also verify the collection contract address, as this is an easy indicator of what is fake and what is genuine.

If you’re interested in obtaining an expensive NFT, make sure the vendor has been authenticated first. You can also look for the unique traits of the NFT you’re interested in. 

Again, make sure to always double-check the contract address of your preferred NFT. This will reveal the creator who minted the collection. A fake NFT store may display an inaccurate minting address, whilst a genuine one will display the precise location of the coin’s minting. So make sure to double-check the contract addresses on the official site of the NFT developers you’re interested in.

Related articles

About NFTrade Academy

NFTrade Academy is a free knowledge base covering everything you need to know about NFTs, from basic to more advanced topics. Utilize our expertise to get up to speed and feel confident about diving headfirst into the world of NFTs.