Has a CryptoPunks NFT on Ethereum really selling for a record $56.3 million as the broader NFT market continues long, slow decline? No. This is why.
Although it is true that CryptoPunk 1563 was completed this afternoonand that 24,000 ETH – worth $56.3 million at the time – was ‘paid’ for the asset, there were both superficial and behind-the-scenes red flags that quickly cast doubt on the legitimacy of the purchase.
First, this particular CryptoPunk was last purchased for approximately $69,000 worth of ETH in September. It doesn’t have any particularly rare features, meaning it typically sells near the entry (or reserve) price for the collection. It’s a ‘floor punk’. There is no obvious reason why it would increase in value by 81,000% in a matter of weeks.
Bought Punk 1563 for 24,000 ETH ($56,292,000.00 USD) by 0x9cbb3d from 0xba1349. https://t.co/FqDvGZvg05 #cryptopunks #ethereum pic.twitter.com/hWimHKYb0x
— CryptoPunks Bot (@cryptopunksbot) October 3, 2024
A look at data about the chain shows that the purchase was made through the devious use of flash loans, also known as crypto unsecured loans that must be repaid in the same transaction.
In a single transaction, the “buyer” of the NFT took out a loan of 24,000 ETH from the DeFi protocol Balancer, and then the “seller” paid the loan back to Balancer. No one actually made any money, although whoever pulled the stunt paid network fees and Punk was indeed moved between wallets.
This isn’t the first time this has happened, and in fact the $56.3 million price here isn’t even close to the “record” of any previous payday loan-financed Punk purchase.
In October 2021, someone used payday loans buy a CryptoPunk for $532 millionand also returns the money in the same transaction. While the move made headlines and sent shockwaves through the then booming NFT market, CryptoPunks maker Larva Labs said it would not follow sales considered legitimate, and other NFT data platforms followed suit.
Apparently there is an interesting twist in this case. According to a pseudonymous on-chain detective 0xExitthe flash loan is apparently tied to an upcoming meme coin called “Kamala Harris Punk,” and the sale appears to be a stunt used to drum up interest in the token’s pre-sale.
7/ The contract is set to accept the highest bid for Punk #1563 after a 7-day period (as long as the bid is at least as high as the current presale value).
The developer will then receive 10% of the token supply and 10% of the money received from the pre-sales and sales of the punk.
— Stop (@0xQuit) October 3, 2024
0xQuit notes that the CryptoPunk in question will be sold to the highest bidder after the week-long pre-sale phase, and the developer is apparently betting that they will make more than the Punk’s actual value – the current reserve price is approximately $63,400 worth of ETH—through NFT sales and token presales. But there is always a risk that the stunt will backfire.
“tl;dr 24,000 ETH is a psyop to advertise what is essentially a pre-sale, where the punk will be sold after seven days to the highest bidder with a minimum bid equal to the amount raised in the pre-sale,” they explained out. “Maybe also a political statement, given the name and the clown makeup.”
Excluding today’s questionable trade, CryptoPunks sales have generated approximately $16.7 million in trading volume over the past 30 days, according to CryptoSlam. The largest known (legitimate) purchase of CryptoPunk took place in February 2022 just under $24 million value of ETH. That was Punk recently resold for an unknown amount.
