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Why Sotheby's Large Auction of 104 CryptoPunks Was Canceled?

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Perhaps NFTs are not infinitely scalable, as proponents claim.

Original title: " Why Sotheby's Massive Auction of 104 CryptoPunks Was Canceled? "

Original source: BloomBerg

Original compilation: 黑米@白泽研究院

This should be a victory.

Sotheby's last week's first stand-alone live auction for NFTs - 104 pieces from the famed CryptoPunk collection - was grouped into one estimate The $20 million to $30 million lot, which Sotheby's described as "historically significant." That was reason enough for expectant crowds to trek to Sotheby's building on Manhattan's Far East Side to witness an auction that could last only a few minutes.

The NFT auction held at Sotheby's New York last Wednesday attracted a lot of people

In advance of the warm-up, Sotheby's said: "There is nothing bigger than this. CryptoPunk is experimental, but it is now a symbolic antique. Has 104 CryptoPunks are even more iconic.”

By this, Sotheby’s is referring to CryptoPunks as one of the most established collections of NFTs in the world. Created by Larva Labs studio in 2017, the series has a total of 10,000 pieces, and each NFT is different. According to NFT market research firm Nonfungible, while the NFT market has slumped in recent months, the 30-day average price has fallen about 47% from a high of about $510,000 in November 2021 to about $270,000 in late February. But CryptoPunks are still the safest investment in the NFT space.

But as the anonymous principal of 104 CryptoPunks discovered, safe investments aren't always the same as good investments. Twenty minutes after the auction began, Sotheby's staff announced over a loudspeaker to the crowd of bidders that the sale had been cancelled.

Sotheby's did not comment that night on the consignor's reasons for canceling the auction. The principal, who goes by the anonymous 0x650d, did not respond to questions via his personal social media.

Sebastian Fahey, managing director of Sotheby's EMEA and executive director of Sotheby's Metaverse, wrote in a statement: "This is not a wider NFT. A reflection of the market, nor of the inherent desirability of CryptoPunks. Base prices for CryptoPunks have remained stable, sales continue to grow rapidly, and value continues to increase. Consignor 'Hodl' (long-term hold) decision demonstrates collectors' market and value for CryptoPunks Confidence remains strong.”

Nevertheless, the cancellation of this auction may have long-term effects on traditional auction houses, as well as the NFT market as a whole.

Auction site

On the night of the auction, Sotheby’s auction area in New York was crowded A group of young people, controlled by a DJ wearing a CryptoPunks mask.

DJ at Sotheby's auction wearing a CryptoPunks mask

< p>This is the first time Brandon Buchanan, founder and managing partner of Meta4 Capital, has participated in a live auction. "I don't even know what to wear," Buchanan said. “I ended up wearing a suit, but everyone was mostly wearing jeans and sweaters.”

One thing Buchanan was sure of was that he was willing to pay for 104 CryptoPunks How much does it cost. The average CryptoPunks sold for just over $270,000 each, meaning that buying all 104 of them would fetch around $28 million on the open market—near Sotheby's top estimate.

But if Buchanan wants to buy 104 NFTs, he can already: because there are quite a few people who currently hold CryptoPunks and are willing to sell them. He believes that the only reason to bid on an auction that includes so many NFTs at once is if he can get a bargain. "You need to be an investment fund, you need a significant discount, and then you flip the price over a long period of time."

He plans to bid from 1300 $10,000 to $15 million, and if the auction house's fee could be about 20% of the sale price, "It's going to be $15 million to $18 million, I'm all in."

Buy, sell, then trade

Clearly, Sotheby's and anonymous consignor 0x650d thought they could make more.

Back to August 9, 2021, when referring to the recent purchase of 104 CryptoPunks, 0x650d posted a post on social media: "Why would I spend $7 million on them? Because I choose wealth. So why should I buy 100 instead of one rare? Because of liquidity and diversification."

Sotheby's auction of 104 CryptoPunks estimated at $20-30 million

Then, on August 28th , in another thread, 0x650d announced that the collection would be split, putting all CryptoPunks into a digital "vault," and then selling tokens representing a fraction of each Punk's total value. "After spending time with the wonderful Punks community on Discord, I'm sure this will help many people share the benefits of my collection."

According to Fractional.art , more than 1,800 unique wallets or individuals purchased 17.9% of the total supply of the token, named PUNK Floor. 30% of the total supply of PUNK Floor is sent to decentralized exchanges.

According to Nansen, a blockchain data analysis company, 0x650d’s wallet deposited 516 ETH into the same decentralized trading platform, To improve the liquidity of PUNK Floor transactions. The same wallet subsequently received 1,462 ETH in proceeds from the transaction, meaning that 0x650d appears to have received a total of 946 ETH.

However, in early December, when the price of ETH was near its all-time high, 0x650d bought back all the NFTs at a price of 8,836.9131 ETH. Since 0x650d owns a majority stake in the PUNK Floor token, the buyback cost only 520 ETH, which was paid to other PUNK Floor token holders, according to Nansen data. This means 0x650d reserves 8,317 ETH.

According to Nansen, it's not an easy process, but 0x650d's profit is clear: According to the price of ETH on March 2, 0x650d Received 426 ETH from the trading platform, worth about $1.3 million.

0x650d posted at the time of the buyback: "I have plans." A month later, the anonymous collector announced the auction at Sotheby's.

Auction house + NFTs

Since sold by Christie's in March 2021 worth 69.3 million Since the US dollar NFT work "Beeple's Everyday: The First 5,000 Days", traditional auction houses have been acting as "megaphones" through which various NFT collectors promote their collections.

Nanne Dekking, founder and CEO of Artory, a blockchain-based digital art registry, and former vice-chairman of Sotheby's, believes: Forbes and Christie's, even Phillips, have established a certain price level for NFTs, and Sotheby's and Christie's price records are currently more telling about the value of your artwork than OpenSea."

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As the record-setting NFT sales of crypto artist Beeple prove, a surefire way to get people to pay attention to your NFTs is to sell them for record prices. (In fact, the buyer of Everydays is a Singapore-based crypto entrepreneur who has invested heavily in Beeple's work.)

Sotheby's "Our NFT sales last year have consistently set new price levels and records for NFTs, demonstrating how our approach to creating unique and curated sales differentiates us from other platforms," Fahey wrote in the statement.

It's not just NFT owners benefitting from huge auctions, it's also benefiting Christie's and Sotheby's, who sold $150 million and $100 million worth of NFTs in 2021, respectively. billion-dollar NFT.

Limitations of Auction NFT

From the initial purchase of 104 CryptoPunks for $7 million to the present, 0x650d appears to have made $1.3 million, and if the auction goes for $10 million, 0x650d will likely turn a tidy profit in less than a year. If the lot sold at the high estimate, the profit would be more than three times the investment of 0x650d.

In other words, in order for the potential windfall to be much higher than $14 million, there must be several bidders on the night of the auction that must decide the value of the 104 CryptoPunks Slightly higher than the prevailing price.

But the appeal of CryptoPunks - namely that they are a mature, "safe" market - seems to be what keeps buyers from committing to such high prices reason.

According to Nonfungible, approximately 5,000 active wallets have bought or sold CryptoPunks more than 11,600 times in the past year. In other words, a relatively small community buys and sells CryptoPunks back and forth, the value of those CryptoPunks has been established among them, and a single sale is unlikely to change this.

Buchanan, who participated in the auction, believes: "The only reason for doing an important [auction] is: whether it shows the traditional contemporary art collector's demand and bring them into the Crypto space. However, these collectors do not seem to be showing up, most of them are crypto enthusiasts, many are not willing bidders, they are just sitting on the sidelines.”

Perhaps for this reason, the "spectacular" spectacle of the 104 CryptoPunks auction did not happen. This has raised concerns about the popularity of NFTs and limited the "fat" that traditional auction houses have brought through NFT auctions in the past 12 months. Perhaps NFTs are not infinitely scalable, as proponents claim. Perhaps, as Sotheby’s cancellation of the auction shows, they were meant for a select few loyal to NFTs.

"It sounds like a traditional art market. Demand is limited, people sell each other, and with one occasional exception, prices are high," says Dekking.< /p>