The Story of Cryptopunk #9998: Did It Really Sell for $532 Million?

CryptoPunk #9998 is part of the CryptoPunks NFT collection with wild white hair, green clown eyes, and black lipstick. Its features make it one of the rarest Cryptopunks available. 

The collection was originally launched in June 2017 by Larva Labs, and was free to collect for anyone interested with an ETH wallet. There are 10,000 Punks in total, each with its distinct characteristics, with no two being the same. 

Though initially free, the collection became one of the most popular in the NFT space, with an all-time trading volume of 515,220.24 ETH and half of the top 10 NFTs sold as Punks.  

CryptoPunk #9998 is one of many Punks to make headlines, though its story isn’t all it appeared to be. Initial headlines stated that the NFT sold for half a billion dollars, though the money from the trade ended up where it started. 

Here’s the story of CryptoPunk #9998. 

What Happened To CryptoPunk #9998?

We need to go back to the initial transaction to understand the story. CryptoPunk #9998 was initially transferred from a cryptocurrency wallet starting with 0xef76 to a wallet starting with 0x8e39. 

The transfer was made for 124,457 ETH, equal to around half a billion USD at the time, making it the most expensive artwork in all historical records. Before this, the most expensive CryptoPunk was CryptoPunk #7523, which sold for $11.8 million.

The transaction quickly made headlines; however, the Punk was soon sent from 0x8e39 to a wallet address starting with 0x9b5a- which headlines didn’t pick up on. 

When looking at the transactions, it was clear that the transaction was an example of wash trading- when an investor simultaneously sells and buys the same financial instruments to create misleading activity in the marketplace. The initial transaction was made with a loan sent to a smart contract and transferred to the seller. The seller then sent 124,457 ETH to the buyer, who repaid the loans. After the transaction, an NFT collector made an offer of 250,000 ETH for the NFT.

Despite the transaction being legit, they were made to create hype around the NFT market and further drive the price of CryptoPunks. CryptoPunk #9998 was technically never sold; a mix of transactions were just made between addresses. Larva Labs later made a statement about the transaction, stating that notifications would be removed for them in the future. 

As of September 2022, nobody can bid on the asset, which means CryptoPunk #9998 technically isn’t the most expensive NFT ever sold, nor the most expensive Punk, which is  CryptoPunk #5822, selling for $23.7 million.

How Is Wash Trading Used In The NFT Market?

Wash trading is when a trader buys and sells an NFT to create hype and false information about a particular project or market. Though this type of trading occurs in traditional markets, the NFT market is particularly prone to such techniques, with projects such as Shiba Inu being created on hype alone. 

Wash trading frequently creates fear of missing out (FOMO), which pressures new and inexperienced NFT collectors to buy from projects that are either a scam or have little to no potential to bring a return on their investment. In the NFT market, the definition includes the purchase of an NFT for external reasons (such as an influencer buying to hype up a project, only to sell when the value increases.) 

Although there are no exact figures, wash trading has hugely impacted the industry, creating a sense of skepticism for new investors prone to scams. However, this is also having a somewhat beneficial impact. 

With so many scams and fake information in the market, NFT projects are forced to be transparent with the owners. To maintain a good reputation, they need to clearly state their real transactions, provide utility for investors, and have a long-term roadmap to show investors what they’re getting for their money. If they fail to do so, their projects will fail in a more educated NFT market.

A report by blockchain analyst firm, Nansen, found that a similar practice is occurring with the release of new cryptocurrencies. The founders of many new projects hold a large percentage of their tokens while hyping the project. Once the project increases in value, they sell their stake and take their profits. This process is also known as a rug pull. As of September 2022, an estimated $25 billion has been lost to cryptocurrency, and NFT rug pulls and scams.

CryptoPunks Continue To Break Records

Despite the somewhat confusing sale of CryptoPunk #9998, CryptoPunks continue to break NFT records. The collection has a market cap of around $2 billion, with a floor price of 61.95 ETH ($108,487.46), making it the most valuable worldwide. 

As of September 2022, the most expensive CryptoPunk is CryptoPunk #5822, which sold for $23.7 million in February 2022 to Deepak Thapiyal. It’s one of nine alien Punks. 

Despite the market for NFTs slowing throughout 2022, CryptoPunks has remained the most popular collection, with owners having a somewhat celebrity status amongst NFT holders. 

Final Thoughts: Can Wash Trading Impact CryptoPunks?

The story of Cryptopunk #9998 was a clear example of how the NFT market can be manipulated by headlines and hype. Despite being frowned upon by Larva Labs, similar stories have been used by other NFT collections to falsely promote projects with little to no utility. 

Although this will impact the crypto market as a whole, newer projects will suffer as a result. Projects such as CryptoPunks already have the reputation to thrive and are less likely to be influenced by the skepticism caused by wash trading. 

Nonetheless, stories such as Cryptopunk #9998 are a great way to spread awareness of wash trading, using their leverage to educate new cryptocurrency and NFT investors and reduce the risk and impact of scams. 

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