CryptoPunk 1563 sold for $56.3 million? Here’s what you missed

CryptoPunks sale: In a headline-grabbing move on October 3, a CryptoPunk NFT was seemingly sold for $56.3 million worth of Ethereum (ETH), but according to blockchain data experts, the move is merely a clever use of flash loans rather than a legitimate sale. 

Image credit: CryptoPunks

CryptoPunk 1563, which lacked any rare attributes and was last sold for just $69,000 in September, appeared to skyrocket in value by an astounding 81,000 per cent.

However, on-chain data reveals that the transaction was conducted using flash loans. The so-called "buyer" took out an uncollateralised loan of 24,000 ETH from the decentralised finance (DeFi) protocol Balancer, only to repay it in the same transaction. Effectively, no funds exchanged hands, and the purchase was simply a technical exercise. The buyer and seller incurred only network fees, with the NFT being moved between wallets.

What are Flash Loans? 

Flash loans are a type of uncollateralised loan available in decentralised finance (DeFi), primarily used on blockchain platforms like Ethereum. Unlike traditional loans, flash loans must be borrowed and repaid within a single transaction or block on the blockchain.

Why CryptoPunks are so popular? 

CryptoPunk NFTs have gained popularity for being one of the first NFTs, one of the earliest examples of digital art on the blockchain. Launched in 2017 by Larva Labs, CryptoPunks is a collection of 10,000 unique, pixelated characters, each with its own traits and rarity, making them highly desirable among collectors. 

Image credit: CryptoPunks

Their limited supply, historical significance, and association with the rise of NFTs have made them a status symbol in the crypto community. High-profile sales and celebrity endorsements have further amplified their cultural value, solidifying CryptoPunks as iconic digital assets.

Previous instances

This is not the first time such a stunt has occurred. In October 2021, a CryptoPunk was purchased for an even more dramatic $532 million, also via flash loans. These transactions are widely regarded as manipulative and are not counted as legitimate sales by NFT data platforms.

Publicity stunt for Kamala Harris Punk? 

Some media reports suggest that the latest flash loan transaction appears to be linked to a marketing ploy for an upcoming meme cryptocurrency called “Kamala Harris Punk.” On-chain analyst 0xQuit reported that the NFT is set to be sold to the highest bidder after a seven-day presale phase for the coin. The developer stands to gain 10 per cent of the token supply and funds from both the presale and the sale of the Punk.

The stunt appears to be aimed at generating buzz for the meme coin, though its success remains uncertain. The current floor price of a CryptoPunk sits at around $63,400 worth of ETH.