“List Shaming”: Toxic Tactics for Inflating Price Floors
I ask you to hearken back to our early Top Shot days…ah, what a time to be alive. NFTs were new, exciting, and let’s be honest no one had a clue what they were doing.
You pulled a rare moment and immediately checked how much it was going for on the marketplace. $25? Not bad!
“Just to be sure I take profits,” you told yourself, “I’m going to list at $24…that way it’ll sell immediately.” You punched it in, waited for the chain to confirm the listing, and sat back to watch the money roll in. But it never did. What gives?
Well, it turns out that someone listed it below your listing at $23 and that listing was the one that sold. Shoot.
“OK, no worries, I’ll delist and put the price at $23 this time.” You canceled it, put it back on the marketplace for $23 this time, and #blessed…you’re about to be rich.
Hold on. During that time, someone listed at $22 to undercut the last sale, and again, *that* is the moment that sold. Ugh.
…this game could (in theory) continue until the moment went all the way down to $1.
Because of this phenomenon, a lot of blame was placed on the “undercutters” for tanking the NBA Top Shot market. They became pariahs, despite the fact that “undercutting” is something we’ve seen in every market from the dawn of time.
I won’t dive too much into the economics behind this (partly because I got Cs and Ds in almost every college economics course I ever took). But essentially, someone is always willing to $1 lower until they’re not. The price that the market arrives at where no one is willing to go lower is called “the price floor” in the NFT world.
At one point or another, we’ve all seen hostility towards the “undercutters” of a given project. Yet I feel we also realize it’s a little silly to shame someone taking profits (especially in something as volatile as crypto/NFTs).
It *still* happens all the time…we try to weed out the “paper hands” in order to artificially drive up the price floor.
I wrote about WZRDs earlier this week and how their “list shaming” took it to a whole new level. While it’s certainly a “new” strategy (burning tokens listed on the floor), it’s nothing “new” conceptually. These projects want “paper hands” to be punished.
Additionally, Top Shot had the #BuyTheFloor movement, Discords of NFT projects will encourage “floor sweeps”, and projects will run contests for those who buy their NFTs during a certain window of time…all in the name of raising that price floor.
On the surface, these tactics seem more harmless than what WZRDs did, however, at its core, all of it is simply unsustainable.
The free market determines the price floor…not the project and its team. All the floor sweeping and list shaming in the world will not stop the market correction.
All trying to manipulate it does is leave your community holding bags.
For all these reasons, you feel as though the market would have matured enough in the past year to learn that manipulating price floors is a fool’s errand.
But alas, the NFT space rarely makes sense and rarely learns from its mistakes.
I suppose I can’t blame them for trying. Price floor really is such an important metric. I know I use it to gauge a project’s success (or lack thereof).
For this reason, you’ll see teams with weak price floors often grasping at straws, gloating about other metrics…like the number of listings they currently have. “Only 10% of all Bloopies listed, and the floor is thin!!!”
Are you even a small NFT project if you haven’t tweeted something like that at one point or another?
Have they considered that there is a low number of listings because all the owners forgot about it and it’s in their hidden folder on OpenSea?
Maybe no one has them listed because there’s no sales volume currently and they’re waiting until it picks up to pay the gas fees for listing. Once there is some action, you don’t think people are going to immediately try to unload that derivative project they’ve been holding for months too long?
The market has everything priced in and if you try to manipulate it…the market will definitely bite back (and expose your tactics as fugazi).
Organic growth is a term that’s overused, but (though few are willing to admit it) it’s actually the only way to sustain your long-term success in NFTs.
But organic growth is scary…because if you leave everything in the hands of the free market (which as I’ve mentioned rarely makes sense or uses logic), you can leave yourself horribly overexposed.
It might mean your favorite project and in turn, your own investments are NGMI… despite them being well-researched, well-thought-out, and well-regarded.
But by ignoring that the market always wins, you’re only undercutting the inevitable.
