What is a Sweep-the-Floor NFT Trading Strategy?
Understand a key investment practice in non-fungible tokens
As speculative assets go, NFTs are at the riskier end of the spectrum. And they have fetched astonishing sums in the marketplace. From Yuga Labs’ Bored Ape Yacht Club to Chiru Labs’ Azuki, a dozen NFT collections registered $400 million in total sales. Even after the May 2022 market crash, the floor price of top collections remained around 70 ETH.
New traders are searching for the next hit collection. This is where the “Sweep the floor” NFT trading strategy comes into play.
What is a floor price?
The floor price is the basic calculation in the NFT market. The NFT market behaves much like the commodity market, with one major difference: the former is decentralized. Pricing in the NFT market is organic. As the project gains public attention, more people rush to buy items from an NFT pool, usually composed of 10,000 NFTs. And the more they buy, the more the minimum price rises.
It is the NFT floor price; minimum available price one is willing to sell an NFT. Considering that NFT marketplaces operate 24/7, this means that a floor price for a particular project can quickly increase.
What affects the NFT floor price?
While these floor tops don’t happen often, they are easily triggered by a celebrity adoption or partnership announcement. If we take a look at Meebit’s floor price on March 12, the floor price jumped 45%, to 6.1 ETH.
Why did the peak happen that day? Because Yuga Labs, creator of the super popular Bored Ape Yacht Club, announced that it bought both CryptoPunks and Meebits, both of which were owned by Larva Labs. This would be equivalent to Nike announcing that it has acquired Adidas. The valuations of all the collections were bound to skyrocket.
Trading volume shows interest in the NFT collection. Like the floor price, trading volume is spurred by various social media/collaboration events. For example, when SnoopDogg and Eminem teamed up to make a BAYC-themed music video, they spurred market interest and speculation, affecting trading volume.
If the volume is high, it indicates high liquidity. In turn, this indicates that there are more potential traders willing to buy or sell NFTs at certain price levels.
Floor sweeping = FOMOing
The NFT market is all about picking the next blue-chip NFT before there is one. Let’s remember that the BAYC floor price was 15 ETH on August 18, 2021. On August 7, it was 81.8 ETH.
This means that conscious BAYC buyers could have sold their NFTs a year later for a 445% profit. Not bad for a speculative asset. Such performances generate a lot of FOMO in the market – fear of missing out. So collectors are constantly looking for the next hit. This is where the strategy of sweeping the floor comes in.
NFT floor sweeping explained
Buyers don’t just have to buy NFTs one at a time – they can buy all listed NFTs at the bottom price. They can sweep the floor. For that to happen, the buyer must follow the project closely before it is minted and released for public trading.
This is the purpose of NFT calendars that track upcoming mints. Additionally, NFT publishers tease their projects on social media, usually Twitter and Discord, to rally the FOMO troops.
One of the latest entrants into this FOMO arena was Goblintown. Arguably, Goblintown was one of the few generative 10,000 NFT collections that look like each NFT was individually handcrafted.
In the same way, the website goblintown.wtf itself was created with both technical and artistic expertise. This combination created quite a buzz, there may be another BAYC in the works. And that’s exactly what happened for a while. Between May 25th and June 2nd, Goblintown’s floor price skyrocketed by 1189%.
In such cases, when blue-chip FOMO is clearer than usual, floor sweepers use search bots that buy all available NFTs.
With a successful sweeping-the-floor strategy, NFT traders can turn them into juicy profits, but there’s a huge risk: if a trader sweeps the floor and then can’t sell the NFTs, they’re left with the bag of potentially worthless digital assets.
More benefits of sweeping the floor
In addition to having a huge turnaround potential, NFT floor sweepers can save gas fees. When transactions are aggregated, they are considered individual. Likewise, bulk buying NFTs by sweeping the floor can save up to 40% on gas fees.
However, this only applies if one uses specialized aggregator services such as gem.xyz. For normal floor sweepers that operate manually, the opposite happens. Because more transactions need to be performed, they increase gas costs.
Likewise, the manual approach slows down transactions, so a trader will be in a race with others who have the same idea. For this reason, NFT floor sweepers tend to use automated sniper bots that seek out NFT collections in pre-coin states. Each bot must be deployed for a specific blockchain network, such as this Solana floor price bot.
NFT floor sweepers are nothing more than classic concert ticket scalpers. Applied to digital assets, they use more sophisticated tools rather than just standing on the street corner. Nevertheless, given the fierce competition and the potential rewards of finding the next blue-chip NFT, all means are allowed in NFT trading wars.
Series disclaimer:
This article series is intended for general guidance and informational purposes only for beginners participating in cryptocurrencies and DeFi. The contents of this article should not be construed as legal, business, investment or tax advice. You should consult your advisors for all legal, business, investment and tax implications and advice. The Defiant is not responsible for lost funds. Use your best judgment and perform due diligence before interacting with smart contracts.
