NFT Trading: How Does the Sweep-the-floor Trading Strategy Work?

NFT Trading: How Does the Sweep-the-floor Trading Strategy Work?

If the crypto space as a whole is regarded as volatile, then NFT trading is the most unpredictable of them all. Prices can rise to the moon or come crashing within the twinkle of an eye. Indeed, all it takes for this to happen is a step in the right direction or one in the opposite.

Still, this volatility has not derailed top bluechip NFTs despite the prevailing bearish crypto market. As of the time of this writing, the floor price of BAYC stands at 76.76 ETH on Opensea. 

The quest to discover the next big NFT collection, therefore, drives traders to deploy the sweep-the-floor trading strategy.

How does it Work?

If you are fortunate to have invested in BAYC at its inception, you will know that the least price at which you can now buy an NFT in the collection is no longer what it was then. That least selling price is what is known as the "floor price."

As an NFT collection becomes more popular, it naturally draws the attention of traders, and this does two things; first, it drives up the floor price; second, it creates liquidity for the asset, showing the willingness of traders to buy and sell the art.

You can call it FOMO or an investment strategy, but NFT traders are constantly on the hunt for the next collection that will become bluechip. NFT traders typically rush towards a collection when announcements of potential partnerships are made or reputable celebrities shill the collection. When this happens, prices normally soar. 

To maximize returns, collectors can purchase a chunk of these NFTs and hope to sell them at a higher price in the future. This process is what is known as "sweeping the floor."

The Benefits

If your calculations are right, sweeping the floor could be a blessing to you. You practically walk around with a smile on your face, knowing that your investment is fast paying off. For instance, the floor price of BAYC has moved from 15 ETH in August 2021 to 76.76 ETH in September 2022. This is more than a 400% increase.

If you hold a chunk of BAYC, you will already be reaping the benefit of sweeping the floor.

Additionally, sweeping the floor helps you save on gas fees. Buying in bulk through an NFT aggregator makes this possible, although this is not applicable to NFT marketplaces.

The Con

As promising as this concept could be, there is a risk factor to it. Buying an NFT collection based on celebrity shills could be a bad investment decision as you could end up holding a bag of worthless art.

This is why it is important to do your due diligence before venturing into making huge investments in an NFT collection.

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