Why the CryptoPunk Flop Is a Turning Point for NFT Auctions

A pseudonymous collector withdrew 104 CryptoPunks from Sotheby's. What does that mean for the future of splashy NFT auctions?

AccessTimeIconFeb 24, 2022 at 7:22 p.m. UTC
Updated May 11, 2023 at 5:03 p.m. UTC
AccessTimeIconFeb 24, 2022 at 7:22 p.m. UTCUpdated May 11, 2023 at 5:03 p.m. UTCLayer 2
AccessTimeIconFeb 24, 2022 at 7:22 p.m. UTCUpdated May 11, 2023 at 5:03 p.m. UTCLayer 2

The stage was set in New York City last night. The Champagne had been poured, the lights were up, collectors sat ready and waiting.

At the Sotheby’s Upper East Side saleroom, NFT enthusiasts prepared to witness what the auction house had framed as a “truly historic” occasion – the sale of 104 CryptoPunks in a single lot.

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The sale – dubbed “Punk It!” – was meant to be a kind of coronation for the pseudonymous investor “0x650d” (a nod to the leading characters of their Ethereum address), who purchased the tokens last year in a single transaction.

Except the sale didn’t happen. Minutes before an auctioneer was expected to take the stage, an announcement rang out over the loudspeaker:

“Following discussions with the consignor, tonight's ‘Punk It!’ sale has been withdrawn. Thank you to our panelists, guests and viewers for joining us.”

The message was reproduced by a Twitter account for the auction house’s NFT division. At publication time, the sale’s official webpage displayed a 404 errorhttps://www.sothebys.com/en/buy/auction/2022/punk-it.

So, what happened?

The non-fungible tokens in the “Punk It!” lot were what’s known as “floor punks” – the cheapest CryptoPunks listed for sale at a given time. 0x650d paid about $5.5 million for the whole batch.

“Why buy 100 floor punks instead of a single rare one?” the collector wrote on Twitter last August, just after the purchase. “The short answer is liquidity and diversification. If you get to own a Picasso, do you care which one?”

At the time, CryptoPunks were far and away the priciest NFT collection. They fell into second place behind the Bored Ape Yacht Club late last year, and the floor price has been steadily trending downward.

Sotheby’s was intending to make a splash with this sale. Two nights ago, the auction house hosted a private dinner to generate buzz for the event. It also brought in ​​Kenny Schachter, a columnist at Artnet News, Colborn Bell, a co-founder of the Museum of Crypto Art, and Sherone Rabinovitz, a technologist, to host a panel on the culture of NFTs just before the planned sale.

See also: JPEGs On Sale, Baby | The Node

On Twitter, 0x650d proudly tried to frame the last-minute withdrawal as a “rug pull” – crypto speak for a type of scam where developers abandon their gullible investors, making off with the profits. (0x650d didn’t immediately respond to a request for comment.)

“Nvm, decided to hodl,” he tweeted.

The collector even made a bespoke meme in the tried-and-true Drake format, suggesting that “rugging Sotheby’s” was an intentional stab at “taking punks mainstream.”

While 0x650d seems to be digging in his heels, reporters are painting a different picture. My colleague Eli Tan, who was on the scene last night, reported that “the highest bid on the table, behind closed doors and before the sale,” was just $14 million – far short of the $20 million to $30 million estimate previously provided by the auction house. The lot’s reserve price was $14 million.

Scott Lewis, co-founder of the crypto analytics platform DeFi Pulse, quipped:

me after my s**tcoin bag is down 95%:
“nvm, decided to hodl.”

Last night felt like a turning point for the once-ascendant CryptoPunks, and an unprecedented fizzling-out for what’s been a massive cash cow for traditional auction houses over the past year.

Larva Labs, the two-man development team behind CryptoPunks, generated controversy earlier this month for selling recently unearthed tokens tied to the CryptoPunks smart contract, called “V1 Punks,” and then promptly disavowing the project. Investors have also repeatedly expressed displeasure with Larva Labs’ lack of community outreach, while Bored Apes get parties with Lil Baby and the Strokes. (It’s worth noting that the average sale price for NFTs in the Bored Ape Yacht Club is down, too.)

Sotheby’s and Christie’s spent 2021 milking the NFT craze with a series of high-profile auctions, and my sense is that the trend can’t continue forever. CryptoPunks will always have historical value, and NFTs won’t disappear from auction blocks anytime soon, but the fracas surrounding 0x650d’s withdrawal was a bad omen for the “headline-grabbing NFT auction” paradigm.

It’s a major blemish on the traditional art world’s track record with crypto assets, after a year of near-constant success.

Maybe, down the line, NFTs like CryptoPunks will find their way into more group sales, with collectors treating them more like traditional artworks. This was how major auction houses approached NFTs in the first place – it was only once the market began to explode that NFT sales were cordoned off from other pieces of modern art.

For token holders, though, the party goes on. After last night’s non-sale: Sotheby’s still went ahead with its post hoc celebration.

Eli Tan contributed reporting.

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Will Gottsegen was CoinDesk's media and culture reporter.