In the world of crypto and digital assets, non-fungible tokens are a well-known phenomenon. A huge audience has been attracted to them in a short period of time. NFT is gaining traction in the mainstream world, and its community is growing rapidly.
There are several projects that have attracted attention from investors around the world. Millions of dollars have been spent on NFT auctions and sales by investors and traders. The crypto industry is always shocked by exciting news and developments coming from NFT projects like CryptoPunks. Among consumers and enthusiasts of digital assets, it has played a significant role in popularizing NFTs.
The CryptoPunks project is the brainchild of Larva Labs and is well-known as an NFT project. On the Ethereum blockchain, the project recently conducted a ‘wash sale’. The outcome of this sale shocked the entire market and made headlines immediately after it took place. As well as influencing market trends, it was also considered to be a big deal in the sector.
Details of the transactions carried out for the NFT purchase
The user transferred CryptoPunk using an address starting from 0xef76. This CryptoPunk was received at an address of 0x8e39. This NFT was later sold to an address that started at 0x9b5a by 0x8e39. NFT was sold for a huge amount of 124,457 ETH, roughly $532 million at that time. The majority of this amount was borrowed from the compound. The headlines of the sale gained immediate attention due to the lack of precedent of artwork going at such a high price in history.
Upon investigating the details of the transaction, we discovered that the ETH was transferred to a smart contract, which was then transferred to the seller. A further 124,457 ETH was sent by the seller to the buyer, who then repaid the seller’s loans. After that, the NFT was returned to 0xef67 and offered for 250,000 ETH. The transactions are technically valid, but they are not quite as true as they appear to be.
NFTs are not really sold here, they are merely a mix of transactions between a variety of addresses. According to Larva Labs, it plans to remove notifications for these types of transactions in the future. In this case, although the transaction may be valid technically, nobody can bid on the asset. Also, a single transaction offers and removes the amount of ETH from the network. Thus, CryptoPunk #9998 might not be the most expensive CryptoPunk.
Most expensive NFTs ever?
- CryptoPunk #7523 was the most expensive NFT on the CryptoPunk project, selling for $11.8 million.
- CryptoPunk #7804 was the second most expensive NFT on the network, selling for $7.56 million.
- CryptoPunk #3100 was the next to sell for $7.52 million.
- Mike Beeple’s EVERYDAYS: THE FIRST 5000 DAYS was the most expensive NFT ever sold legitimately. Christie’s sold the NFT for a record price of $69.3 million. With more money being invested in different projects, and investors spending a lot on NFTs, the NFT market is growing rapidly. As a result, the record set by EVERYDAYS might eventually be broken, but not by CryptoPunk #9998.
NFT Wash Trading: What is it and how does it manipulate the market?
In the NFT art industry, the type of transaction used to sell CryptoPunk #9998 illustrates how the wash trade works. The NFT community has been alarmed by this practice lately. A trader uses the wash trading process to spread false information to the market by buying and selling the NFT. Traders use such news to spread FUD and FOMO in the market because the market is highly reactive to such news. To put it simply, a trader acts as both buyer and seller to carry out a wash trade.
A wash trade is one that is not exclusively used to buy or sell a product in the NFT space. The statistics of the market are heavily influenced by wash trading. Since the NFT art industry relies on market statistics and analysis to make better investments, wash trading hurts this practice in a negative way. By spreading rumors about such figures, people can be led to make investment choices that distort the natural market.
Consequently, the NFT projects are forced to clean up and set their own records straight. They must distinguish genuine transactions from fake ones. Because of this, wash trading complicates the entire process, and stakeholders face more challenges when making a decision. Buying or selling a product without knowledge of its real value becomes difficult for them. The role and influence of wash trading on the market have also been noted and commented upon by several crypto experts. They argue that the practice has become more common in recent times and that many investors and traders are exploiting it to manipulate the market.
We can conclude that the crypto and NFT markets are better off without wash trading. It is also better to eliminate such practices from an exciting and new sector such as NFT, to have a more transparent and reliable environment. Several investors and NFT projects will have to bear the consequences if they do not do so, thus reducing the popularity of NFTs.
Furthermore, NFT projects, such as CryptoPunks, should acknowledge wash trading in their network and find solutions. Wash trading could be tackled by raising awareness of these vague transactions and educating the public about them.