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How Do NFT Auctions Work And How It Can Help You Sell Higher

June 13, 2022

NFT auctions can ensure NFTs are sold at market value for both buyers and sellers. Here’s how it works.

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Most things we buy and sell are at a fixed price, but auctions are extremely popular for
buyers and sellers of NFTs. Twitter founder Jack Dorsey sold his first tweet for 4.5 million
dollars at an auction, while a late surge in NFT bids landed digital artists Beeple a 69.3
million Dollar payday for his NFT work “Everydays: The first 500 days”. Why are so many
NFTs sold via auctions?

What are NFT auctions?

Rather than setting a fixed price for an NFT, an auction allows prospective buyers to bid on
an item during a specified time frame, with the NFT going to the highest bidder at the end.
There are several types of NFT auctions that are popular on NFT marketplaces:

Scheduled auction

This is the NFT auction similar to what we see in many classic scenes at auction houses. A
countdown for the auction is set, along with a recommended starting price, although any bid
is accepted. AT the end of the set time the highest NFT bid wins. This NFT auctions
guarantees a sale.

Reserve auction

If a seller is scared that his or her NFT will sell for too low a price, they can use this method.
Setting a reserve price, and only when someone makes a bid for that price, the auction
countdown begins, and the price can go yet higher.

Dutch auction

Some NFT auctions have begun using the dutch auction method. In this method, the seller
begins with a high asking price, usually above market value, and then progressively lowers
the price until someone is willing to make a bid. Once an NFT bid is made, that person wins
the auction instantly.

Advantages of NFT auctions

Many people prefer to sell in an NFT auction because they believe they can fetch a better
price. This is especially true with rare, single items by famous artists such as Beeple, when
the hype surrounding the auction can raise the price significantly. Although there are also
advantages for the more ordinary seller. Here are three:

Eliminate short-term flippers

Some people buy NFTs only to sell them within the next few hours or days for a short term
profit. Because an auction is set by the market, and due to the delayed timetable, most
short term holders avoid auctions. If a seller is interested in long term holders NFT auctions
are better.

Market value

An auction helps evaluate the market value of a certain item. Rather than a seller just
setting a price that could be too high or too low, an auction allows bidders to decide the
value.

Hype

Like a real life auction at Sotheby’s or Christie’s, an auction draws attention, creating
interest and hype. The most expensive NFT’s, like Beeple’s “Everydays” and Pak’s “Merge”,
saw huge price hikes at the last moment. An auction can drive prices up.

How to take part in an NFT auction?

Auctions take place on NFT marketplaces. Anyone can connect their wallet and place a bid
with the right cryptocurrency. This usually requires exchanging for a token pegged to the
cryptocurrency. In the case of Ethereum (ETH), this would be Wrapped Ethereum (WETH).
Enabling bids without gas fees, although the exchange for tokens sometimes requires a gas
fee.

Conclusion

NFT auctions are another way people can buy and sell NFTs, with advantages and
disadvantages. It is therefore worth considering the circumstances and the item involved
when deciding whether to buy or sell via an NFT auction and what type of NFT auction to
take part in.

FAQ

What is an NFT auction?

An NFT auction is when an NFT is sold via a bidding process rather than at a fixed price.

Where can I auction my NFT?

Most NFT marketplaces allow sellers to decide if they want to sell their NFT for a fixed price or
sell via an NFT auction.

Can NFTs be resold?

Of course. You can always resell your NFT if you find a buyer.

What happens after an NFT auction?

The NFT is transferred to the wallet of the person who won the NFT auction by placing the
highest bid.

What happens if you make an offer on an NFT?

You are now the highest bidder on that NFT. If nobody else makes a bid and the auction ends,
the transaction will occur and you will have bought the NFT for the bid price. If someone else
places a higher bid, your former bid is no longer relevant. You must decide now if you want to
place a new bid or not.