Why Is the CryptoPunk Fail a Critical Moment for NFT Digital Art Auctions?

104 CryptoPunks were withdrawn from Sotheby’s by an anonymous collector. What does this imply for the future of high-profile NFT auctions?

On 24th February, the stage was set in New York City. The champagne had been poured, the lights had been turned on, and the collectors sat waiting.

NFT collectors gathered in Sotheby’s Upper East Side saleroom to witness what the auction company described as a “really unprecedented” event: the sale of 104 CryptoPunks in a single lot.

The “Punk It!” sale was intended to be a sort of coronation for the anonymous investor “0x650d” (a reference to the first characters of their Ethereum address), who purchased the tokens in a single transaction last year.

The deal, however, did not take place. An announcement rang out over the speakers minutes before an auctioneer was scheduled to take the stage:

A Twitter account for the auction house’s NFT art website retweeted the remark. 

“The ‘Punk It!’ sale for tonight has been canceled after conversations with the consignor. Thank you for joining us, panelists, guests, and viewers.”

So, what went wrong with this NFT Digital Art?

The non-fungible tokens in the “Punk It!” lot were “floor punks,” which were the lowest CryptoPunks available for purchase at the time. For the entire batch, 0x650d paid almost $5.5 million.

“Why would you buy 100-floor punks rather than one uncommon one?” Last August, shortly after the acquisition, the collector posted on Twitter. “In a nutshell, liquidity, and diversification.” Do you care which Picasso you receive if you get to possess one?”

Also, read – The rise of CryptoPunks NFT to a billion dollar

CryptoPunks was by far the most expensive NFT digital art collection at the time. Late last year, they slipped to the second position behind the Bored Ape Yacht Club, and the floor price has been rapidly declining.

Sotheby’s wanted to make a big deal out of this auction. The auction house held a private dinner two nights earlier to promote the occasion. It also invited Kenny Schachter, an Artnet News columnist, Colborn Bell, a co-founder of the Museum of Crypto Art, and Sherone Rabinovitz, a technologist, to participate in a panel discussion on the culture of NFTs just before the planned sale.

0x650d triumphantly attempted to depict the last-minute withdrawal as a “rug pull” — crypto slang for a form of scam in which creators dump their naïve investors and benefit. (0x650d did not react to a request for comment right away.)

He tweeted, “Nvm, chose to HODL.”

The collector even created a custom meme in the tried-and-true Drake format, implying that “rugging Sotheby’s” was a deliberate attempt at “bringing punks mainstream.”

Reporters portray a different picture than 0x650d, who appears to be digging in his heels. Last night, my colleague Eli Tan, who was on the scene, said that “the highest bid on the table, behind closed doors and before the sale” was only $14 million, significantly less than the auction house’s original estimate of $20 million to $30 million. The reserve price for the lot was $14 million.

Perhaps in the future, NFTs like CryptoPunks will be included in more group sales, with collectors seeing them as traditional artworks. This was how major auction houses viewed NFTs in the beginning – it wasn’t until the market exploded that NFT sales were separated from other modern art auctions.