TL;DR- The reserve price is the lowest price that a seller is willing to accept for their item. When an item is listed, the reserve price will be hidden from buyers. If a buyer bids below the reserve price, the seller has the option to either decline the offer or accept. If the seller accepts the offer below the reserve price, they’ll have to pay the Ethereum gas fees to cover the transaction. The minimum reserve price allowed on OpenSea is 1 WETH.
OpenSea is currently the largest NFT marketplace, with a daily trading volume approaching 2 million dollars. NFT markets are less efficient than their crypto market counterparts, meaning that if you can spot great collections before they become famous it’s still possible to make money buying and selling NFTs. I’ve enjoyed NFTs as an asset class because unlike crypto tokens they have aesthetic value, the same way that art does.
An important thing to know is that auctions on OpenSea must be done in the Wrapped Ethereum (WETH) token.
‘Wrapped Ethereum’? WTF?
Auctions and bids in auctions take place with Wrapped Ethereum (WETH), a currency that has a 1:1 value with ethereum but is used for smart contract sales (I.e. the NFT sells when certain criteria are met, like the auction ends). WETH allows users to make pre-authorized bids. See OpenSea’s guide for how to exchange ETH for WETH on OpenSea and how to get WETH as a token in your MetaMask wallet.
What’s the ‘reserve price’ on OpenSea?
When trying to sell an NFT, you have two options: either the ‘buy now’ option where you set a price and buyers can only pay that price, or an auction. Reserve prices only apply to auctions. An item you put on auction without any reserve price will definitely sell as long as there’s at least one bid. But often, sellers don’t want to sell their beloved NFTs for any less than a certain price.
A reserve price should be a price that you set where you won’t accept any offers below that price. (But you can accept those lowers if you want! Read on)
After the auction starts, the seller cannot adjust the reserve price. So you better choose your reserve price wisely!
If the auction ends without any bidders submitting a bid that’s at or above your reserve price, the auction will end without sale of the item. If the reserve price is met, the auction will close with a sale to the highest bidder still. If a sale occurs, you’ll get a notification on your registered email address with OpenSea.
Can I still sell if a bid is below my bid price?
Yes, you can still sell your item if a bid is submitted below your reserve price but you still want to sell, but you’ll have to cover the Ethereum gas fee, which can be steep at times. You’ll be able to accept this lower-than-reserve price bid if you choose for up to a couple of days after the auction ends.
OpenSea also allows for a ‘Dutch Auction’, where you don’t set a reserve price but you set a sale price that decreases over time. Following basic supply and demand laws, your NFT is obviously more likely to sell as the price gets lower. This is the magic of the Dutch Auction! This can be done in the list item for sale screen by selecting the method drop down box and selecting sell with declining price. Depending on the length of the auction and the differential between the starting and ending prices, OpenSea will depreciate the price X amount each day in a straight line.
Can bidders see my reserve price?
Nope! Your reserve price is invisible to users, similar to how sellers set reserve prices on eBay that are hidden. In addition, users won’t be able to message you asking what your reserve price is since OpenSea only shows your wallet address and not any personal information on your profile like email or phone number.
Is there a minimum reserve price requirement?
OpenSea requires minimum reserve prices to be set at 1 ETH, so reserve prices aren’t going to apply to a huge swath of NFTs that trade below 1 ETH. This is because OpenSea covers the transaction fee when the sale ends, and OpenSea wants a healthy cut (2.5% of 1 ETH at least, or $75 at time of writing) of the transaction.
What fees will I pay when I sell?
OpenSea makes a good amount of money doing what they do. There’s a reason why they’re such a hot company right now. OpenSea takes 2.5% of every sale, so if you flip over to OpenSea–>Stats and look at the daily trading volume it’s obvious they’re making some serious bank on their little operation. For us, the buyers and sellers of NFTs, this sucks. Buying and selling in the NFT space is risky, and fees like this in addition to Ethereum gas fees make it risky and expensive.
While this does seem high (and frankly, it is) other NFT marketplaces charge even higher fees, with some exchanges taking a 7.5% cut of your NFT sale earnings. Outside the crypto and NFT space, fees this high are only charged by hedge fund managers and other firms who work round the clock to be doing analyses on the investments in a portfolio. Since the NFT marketplace space is new, not enough competitors to OpenSea have entered the market to help drive fee costs down. The same thing is going on at Coinbase with their outrageous fees.
I have yet to sell an NFT on OpenSea using the auction method. The only experience I have is straight up selling an NFT at a fixed price (which I set a little bit below the price floor for that collection) because I didn’t want the drama and hassle of an auction. There are still many who swear by auctions- and I don’t have reason to doubt their claims that they’ve made more money than they thought possible because of high demand for whatever NFT they were selling.
I’d use the auction option if you absolutely want to get rid of an NFT no matter what the price, or if the item you’re holding is in a super hot collection and you may be able to get more than if you sold at a fixed price.
Want to know how much NFTs in a certain collection have been selling for through auctions? Go to an NFT collection’s homepage and select the drop down menu that shows price: low to high. Select the recently sold option and look for the NFTs with the pink/purple WETH symbols. Often the auctioned NFTs sell for lower amounts than the fixed price NFTs. This alone shows you that you should use a reserve price if you’re able to! Remember, you’ll only be able to if your item is selling for at least 1 ETH .