CryptoPunk NFT Sale [Fake]: A Flash Loan Facade Amidst NFT Market Decline

2024-10-16, 02:51

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![](https://gimg2.gateimg.com/image/article/17290465081692587449analysis.jpeg)
## [TL; DR] 
The purchase of CryptoPunk 1563 on 1 October has turned out to be a marketing stunt.

An analyst believes that the sale of CryptoPunk 1563 for 24,000 ETH was in preparation for the launch of Kamala Harris Punk NFT.

Market manipulation in the NFT sector may decrease investor confidence and trust in the assets.

## Introduction 
Although non-fungible tokens [(NFTs) are not as popular as cryptocurrencies](https://www.gate.io/learn/articles/breakthrough-of-nft-bringing-fungible-tokens-and-nfts-together/1997 "(NFTs) are not as popular as cryptocurrencies"), people often buy them at high prices.  Sadly, there are times that the sellers resort to market manipulation to benefit more.  For example, at times the investors buy fake NFTs with no value on the market. In this analysis we focus on a recent case of market manipulation where a purported investor purchased an NFT for a whopping $53.6 million.

## A case of Fake Sale:  CryptoPunk NFT Sold for $53.600 
The crypto sector has been shocked by the recent sale of CryptoPunk 1563 for 24,000 ETH, valued at around $56.3 million at the time of the transaction. As a result of the unexpected sale price many people have questioned the authenticity of the transaction. Upon a detailed blockchain analysis some analysts have concluded that the sale of the [CryptoPunk non-fungible token (NFT)](https://www.gate.io/learn/articles/what-is-crypto-punk-nft/4288 "CryptoPunk non-fungible token (NFT)") was just a marketing NFT stunt. Basically, the NFT was sold on 3 October using a flash loan.

On-chain data shows that the buyer used a flash loan from <a  rel="nofollow noopener noreferrer"  href="/price/balancer-bal" target="_blank" class="blog_inner_link">Balancer</a> Protocol – an automated market maker (AMM) - to purchase the NFT. After the NFT sale transaction was complete the seller wallet returned the 24,000 ETH to <a  rel="nofollow noopener noreferrer"  href="/price/balancer-bal" target="_blank" class="blog_inner_link">Balancer</a>. In reality, this shows that the sale was not genuine. It was just a case of the NFT changing hands from one wallet address to the other. The buyer only used $54 which was the gas fee for crypto transactions at that time. Since [CryptoPunk 1563](https://www.gate.io/nft/collection/19626/Crypto---Punk "CryptoPunk 1563") was bought for $69,000 in September there is no reason why its value could have risen by 81,000% within a few weeks. To make matters worse, the NFT has no rare attributes to warrant such a high price rise within a short period. 
![](https://gimg2.gateimg.com/image/article/17290466441.jpeg)
CryptoPunk 1563 Sold for 24,000 ETH – x.com/Cryptopunksbot

24,000 ETH has turned out to be  the highest  amount paid for a CryptoPunk NFT, even during the NFT mania in February 2022. However, CryptoPunk 1563 was not the first NFT to be purchased using flash loans. For example, in October 2021 someone used a flash loan to acquire another CryptoPunk 9998 valued at $532 million at that time. However, many people deemed that transaction fake. Even Larva Labs, the CryptoPunk creator, said that it would not track the sale since it was not legitimate.

Commenting on the transaction, [Larva Labs said](https://x.com/cryptopunksnfts/status/1453903818308083720 "Larva Labs said"), “This transaction (and a number of others) are not a bug or an exploit, they are being done with “Flash Loans” In a nutshell, someone bought this punk from them self with borrowed money and repaid the loan in the same transaction.” However, Etherscan recorded that transaction, something that would confuse many people. 
![](https://gimg2.gateimg.com/image/article/17290467032.jpeg)
Etherscan Confirmed Punk 9998 Transaction – x.com/Cryptopunksbot

## The Real Motive Behind CryptoPunk 1563 NFT Stunt: A Marketing Gimmick
No clear reason has been given for the recent sale of CryptoPunk 1563 using a flash loan. However, several analysts have hinted that this could have been a marketing gimmick. Some claim that the NFT stunt was carried out to prepare for an up-coming meme coin called Kamala Harris Punk. Therefore, the NFT sale might have been a means to seek support for the marketing of the meme coin. Pseudonymous sleuth 0XQuit, commented on this. [He said](https://x.com/0xQuit/status/1841945533453369807 "He said"), “This time, it appears to be an attempt at marketing a Kamala Harris Punks memecoin. Contract B in this case is a newly deployed ERC20 token called Kamala Harris Punk, that has an open presale for ~1 week.”

However, 0XQuit said that the NFT in question will be sold to the highest bidder after a presale of one week. The result of the sale may go either way – a profit or loss. 
![](https://gimg2.gateimg.com/image/article/17290467893.jpeg)
The Way Forward After the NFT Stunt – x.com/Quit

## Analyzing the NFT Market - Legitimate high-value NFTs
There are [many NFTs on the market at the moment](https://www.gate.io/learn/articles/what-are-the-main-nft-collections/934 "many NFTs on the market at the moment"). However, some of them no longer have any value at all. CryptoPunks are among the highly valuable and legitimate NFTs on the market. For example, CryptoPunk #2386, which was acquired for 10 ETH is now worth around 600 ETH (about $1.5 million). However, it was locked up and overlooked for a long period. In the last one and half months CryptoPunks with a total value of $16.7 million were sold.

Liberty Cats, hosted on <a  rel="nofollow noopener noreferrer"  href="/price/polygon-matic" target="_blank" class="blog_inner_link">Polygon</a>, are also legitimate. As a result, during the past three months the Liberty Cats had over $157.86 million in trading volume. The NFT collection is still in demand after recording 3,010 transactions since their launch during  Q3, 2024. The Bored Ape Yacht Club [(BAYC)](https://www.gate.io/learn/articles/what-is-bored-ape-yacht-club/143 "(BAYC)") collection is one of the [most loved sets of NFTs](https://www.gate.io/nft/collection/9163/BAYC "most loved sets of NFTs"). During the past three months more than 10,000 profile-pic NFT were minted on <a  rel="nofollow noopener noreferrer"  href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain. They had a total NFT trading volume of 15.1K ETH. The BAYC collection is also highly regarded in the NFT sector. Their pioneering role in profile picture (PFP) NFT resulted in their high demand.

And, indeed, [Pudgy Penguins, with 8,888 generative penguin avatars](https://www.gate.io/learn/articles/all-you-need-to-know-about-pudgy-penguins/1756 "Pudgy Penguins, with 8,888 generative penguin avatars"), developed by NFT studio Igloo on <a  rel="nofollow noopener noreferrer"  href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>, are also a collection of valuable NFTs. During the last quarter they had a trading volume of 14.67K ETH.

Read also: [Rarest Pudgy Penguin Fetches 400 ETH](https://www.gate.io/blog/1524/rarest-pudgy-penguin-fetches-400-eth "Rarest Pudgy Penguin Fetches 400 ETH")

## Risks and Repercussions of Manipulation in the NFT Market 
Market manipulation occurs when some investors use deceptive means to inflate the values of assets before selling them. In some cases, the traders can use fraudulent ways to force the values of assets such as NFTs to fall before acquiring them. There are various tactics which the fraudulent traders can use such as spoofing, front running, wash trading, insider trading as well as pump & dumps schemes. One popular way of manipulating the market is to use paid celebrities to promote an NFT. Once the value of the NFT has risen to a certain level the trader takes all the profit and dumps the asset.

No doubt, market manipulation negatively affects the NFT market. It may make it possible for NFTs to gain much legitimacy. Some of the NFTs whose price might have been manipulated may lose value for good. Also, the price swings that are associated with market manipulation may discourage some investors from investing in NFTs and other digital assets. In general market manipulation in the digital sector may lead to loss of investor confidence and trust in virtual assets.

Read also: [Discover the Next Biggest NFTs in Web3](https://www.gate.io/web3/nft "Discover the Next Biggest NFTs in Web3")

## The Current State if the NFT Market
For the greater part of 2024 the NFT market was in a rollercoaster ride until the fourth quarter where there are signs of market recovery. The quarter-over-quarter NFT trading volume fell by about 50% during Q3 to $1.1 billion. Basically, the year started with the total NFT market volume of $4.1 billion. From there it plunged to $2.25 billion in Q2 before sliding further to the current level. However, the latest data from [CryptoSlam](https://www.cryptoslam.io/nftglobal?timeFrame=year&headerPeriod=7d "CryptoSlam") shows that the NFT market decline is continuing. For example, during the last 30 days the total NFT sales amounted to around $333 million. The following graph summarizes the major trading trends.
![](https://gimg2.gateimg.com/image/article/17290470184.jpeg)
NFT Yearly Sales – CryptoSlam

As <a  rel="nofollow noopener noreferrer"  href="/price/the-graph-grt" target="_blank" class="blog_inner_link">the graph</a> shows there was an increase in unique buyers during the past one year. However, there has been a decrease in total sales and unique sellers. In all, the NFT market has shown resilience in the face of several challenges that include the current global economic conditions and raging wars in Ukraine and the Middle East.

## The Future of NFTs and Blockchain Transparency
The future of NFTs is mired in uncertainties due to several factors that include changes in regulations. At the moment, the original hype surrounding NFTs has dissipated and only NFT enthusiasts remained focused. Apart from the economic challenges that most countries are facing, the rise in scams and other illegal activities has resulted in the level of [interest in NFTs to drop](https://www.gate.io/blog/1250/nfts-market-value-reduces-by-over-90-after-crypto-crash "interest in NFTs to drop"). In the United States the SEC is taking steps to regulate the NFT sector since it has declared that NFTs are securities.

Related article: [Why Many Crypto Assets Are Falling](https://www.gate.io/blog/1275/why-many-crypto-assets-are-falling "Why Many Crypto Assets Are Falling")

Despite the current state of the NFT market new developments may reposition them for growth. As an example, the emergence of new use cases may ignite sustainable interest in the tokens.  NFT may have a role to play in different sectors of the economy including education, real estate and gaming.  The other thing that will likely increase the adoption of NFTs is interoperability. In other words, the NFTs that are usable on different platforms will have more utility than those which are platform-based.

The enhancement of blockchain transparency may also help in creating trust in the NFT market. For example, the blockchain protocols that deal with NFTs should ensure that there is no room for counterfeit assets. They should also ensure that there are no fraudulent activities on their platforms. Another essential aspect that can boost the adoption of NFT is fair compensation to the creators. As an instance, there should be a clear means [of tracking royalty for NFTs](https://www.gate.io/learn/articles/how-nft-royalties-work-designs-challenges-and-new-ideas/3624 "of tracking royalty for NFTs").

## Conclusion 
On 1 October an NFT investor used a flash loan to purchase CryptoPunk 1563 for 24,000 ETH. However, the high buying price created doubt among the NFT community since the token was valued at $69,000 in September. It was eventually established that the sale was not legitimate. In the meantime, since the beginning of 2024 there has been a strong decline in the value of NFTs. One way in which interest in NFTs may be reignited is the introduction of new use cases.

<div class="blog-details-info">
<div>Author:**Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.All investments carry inherent risks; prudent decision-making is essential.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>