CryptoPunks are dominating Twitter, skyrocketing in value, and making their way to fractional marketplaces, so it's time to take a deeper dive to understand:
It's all in here. Put on your 3D glasses, hoodies, and beanies, and keep your limbs inside the vehicle - we may encounter some zombies and aliens along the way. If these references don't make sense yet, don't worry they will...though I can't promise they'll get any funnier.
What are CryptoPunks?
Sheesh, that’s a loaded question I’ve just asked myself.
Let’s start with the characters, and we’ll circle back to everyone’s favorite three letters: NFT.
CryptoPunks are algorithmically generated characters, appearing in 24x24, 8-bit style pixel art images. The Punks are 10,000 strong, and no two characters are exactly alike, set apart by their unique combination of attributes, each attribute carrying a differing level of rarity. The Punks are inspired by the London punk scene of the 1970s – chosen for the dystopian aesthetic of non-conformity, which reflects the anti-establishment, non-conformist spirit of the blockchain and broader crypto movement, particularly in its earlier days. The film, Blade Runner, and the novel, Neuromancer, are frequently credited as inspiration.
Okay, but we’ve all seen the Twitter avatars, and images of all 10,000 Punks are right on the Larva Labs’ website. So what is a CryptoPunk?
A Non-Fungible Token of course!
Proof of ownership of a CryptoPunk is stored on the Ethereum blockchain. Essentially, the Larva Labs team wrote a contract that lives on the Ethereum blockchain which incorruptibly allows anyone to buy and sell Punks, storing the results of execution (and therefore the ownership) forever. So, sure, anybody could make any Punk their avatar, but the blockchain is incontrovertible: only one person truly owns the CryptoPunk at a time.
One note: the images of the CryptoPunks themselves are not stored on the blockchain. They’re too large. Instead, the Larva Labs team embedded a hash (unique value identifier) of the composite image of all punks into the contract, which can be independently verified to ensure a market participant is transacting in the authentic, official CryptoPunks.
What makes CryptoPunks historically and culturally significant?
When Matt Hall and John Watkinson, founders of Larva Labs, created CryptoPunks in the middle of 2017, they were minting a project that would be among the OGs in many ways, though they may not have known it at the time.
The CryptoPunks were one of the very earliest NFTs on Ethereum. In fact, the code written by Hall and Watkinson is widely credited for inspiring what is now the most popular standard for NFTs, the ERC-721 standard. CryptoPunks are not quite ERC-20 tokens either, ERC-20 being the standard for fungible tokens, though they can be watched as a token in a given user’s wallet. That Punks don't fit neatly into either bucket underscores just how early the project was and how formative it was for NFTs broadly.
Similarly, while CryptoPunks were not the first art NFT (that honor belongs to Kevin McCoy’s “Quantum”, minted in 2014 on the Namecoin blockchain), they are revered as the inspiration for the modern CryptoArt movement. The ownership model itself is a substantial innovation and a revolutionary step for the digital art market. And while each individual CryptoPunk is a piece of art, the broader project serves as a larger, conceptual work, and Hall and Watkinson believe it may represent “the first work of art with a self-contained mechanism for recording and transacting its ownership.”
Ownership model aside, one need only scroll Twitter for thirty seconds to see that the algorithmically generated Punks have spawned numerous imitators, whether it be Bored Apes, Gutter Cats, or even BabyPunks. A profile picture of your own face isn't cool. You know what's cool? A profile picture of a fictional character, human or not, wearing ridiculous accessories. Those follow-on projects, compelling though they may be to many, and newcomers, which may find intriguing ways to attach greater utility, will never boast the historical and cultural influence of CryptoPunks, attained by innovating and inspiring.
There is a clear demand for an expression of identity conveyed digitally, whether for a flex, for access, or for community inclusion, and CryptoPunks laid an artistic and sturdy foundation for such expression.
The influence of CryptoPunks in generative character art, and generative art more broadly, is unquestionable, as is the influence of the project on NFTs, digital art, and CryptoArt. The breadth of their importance and significance informs the overwhelming demand for the limited supply available, which even as successor projects continue to arrive, will never increase. The question, of course, becomes whether or not you believe many of those things - NFTs, generative art, CryptoArt - are more than a passing fad (some don't) and have the staying power to preserve that significance. It's worth keeping in mind that historical significance is typically attained over years and decades.
Which punks are most valuable?
In short, aliens, apes, and zombies, but we’ll get much more nuanced in a moment. As is the case in other collectible asset classes, rarity increases value. Among the 10,000 CryptoPunks, the vast majority of which are human, there are 88 green-skinned zombies, 24 apes, and nine light blue aliens. Like the other Punks, these non-human Punks also have attributes which may confer an additional level of rarity.
Of the twelve largest sales directly on the Larva Labs marketplace, two are aliens (the top two), five are zombies, and four are apes. Just one is human, and it is one of eleven Punks bearing six attributes, just short of the maximum of seven held by only one Punk (technically the rarest Punk of all: CryptoPunk 8348 – for sale by owner for 60KΞ or just under $190 million).The only other human Punk in the top twenty is what is termed a Genesis Punk – one of eight bearing no attributes or accessories at all. Appearing most frequently (ten times) in the top 60 sales on the platform from the human contingent are those Punks with the Beanie attribute – there are only 44 such characters.
If you’re in the market for an alien, the cheapest available would be 25K ETH, or just under $79 million. For apes, it’s 4.21K ETH, or $13 million, and for zombies, 1.6k ETH, or roughly $5 million.
Punk type aside (alien, ape, zombie, female, male), attributes play a leading role in defining Punk rarity and therefore value. Those attributes appearing most infrequently (like the Beanie) amongst the Punk population garner the most value. Similarly, the number of attributes possessed by a Punk can make it more or less rare than others, with a very small (0 or 1) or very high number (5, 6, or 7) of attributes being significantly more rare and valuable than those more common Punks with two, three, or four attributes.
However, it’s critical to understand that rarity of an attribute alone does not make it a lock to be more valuable than another more common attribute, all else equal. This cannot be emphasized enough. It would be missing a good portion of a Punk's allure to only consider the rarity numbers.
Rarity certainly matters for Punk value. But to many buyers, collectors, or admirers, these are subjectively appreciated works of art that can be used to express identity. So, certain attributes are more sought after than rarer ones.
Take, for example, 3D glasses. There are 286 Punks with this attribute, and over the last 90 days, the average sale price is 79.19 ETH. There are 46 attributes that are rarer than 3D glasses. Just eight (!) have a higher average sale price.
In the chart below, it’s clear that 3D glasses are just one example of an attribute punching above its rarity in average sales price. Among the other outliers are hoodies, gold chains, luxurious beards, and VR. Now, these figures don’t isolate the impact of each attribute. So, they could be influenced by how often a certain attribute is included with other valuable attributes or with a higher (or lower) number of attributes. Still, there’s clear subjective appeal at play here. After all, who can't identify with liking a good hoodie?
Are CryptoPunks ever sold outside of the confines of the marketplace?
Yes, both in ways that make them more noticeable to the traditional art world and more accessible to the crypto community. Let’s start with the former.
Christie’s was the first major house to bring CryptoPunks to the auction floor. Following their $69 million sale of Beeple’s Everydays in March 2021, the Christie’s team expanded their auction pioneering of the NFT category by offering Punks alongside works from the likes of Basquiat, Richter, Bradford, Banksy, Hirst, Wool, and others.
The highest selling lot from that particular auction? The CryptoPunks!
A set of nine Punks, consigned directly by Larva Labs and all in the first 1000 minted, sold for $16,962,500. Notably, included in the set were an alien with a bandana and regular shades (CryptoPunk 635) and CryptoPunk 2.
The set’s inclusion alongside the works of renowned artists (and its stronger performance!) signals that a new era in art, or more broadly, assets with largely subjective value, may be upon us. While the value of Punks may not make sense to many, the same can and has been said about the works of artists who have long, consistent, and impressive track records of growing sales values. This is not to say that Punks are a certainty to match those track records long-term, only that a blueprint for future success as an asset exists.
Sotheby’s entered the NFT fray soon after Christie's, curating its Natively Digital NFT auction in June of this year. Sold in this auction was the previously mentioned Quantum by Kevin McCoy, considered to be the first NFT, for $1,472,000. Stealing the show again, though, was a CryptoPunk – specifically CryptoPunk 7523, an alien with an earring, a knitted cap, and a medical mask. It sold for $11,754,000, making it the most expensive Punk sale ever.
In early July, Sotheby’s returned to the well, this time selling five CryptoPunks, each of which accompanied by a signed, titled, and numbered lithograph. Just 24 Punks were printed as lithographs, each accompanied by a sealed envelope which contained the private key to claim ownership of the asset. A fitting marriage of physical and digital. All five sold for in excess of 150,000 GBP each.
It’s worth noting that sales at large auction houses typically come with significant fees on both the seller’s and buyer’s side of the transaction. The most expensive sale to occur on the CryptoPunks platform itself was for over $7.5 million, and the transaction fee paid by the bidder was $27 and the seller $16, for a total commission of 0.0006%. Both the Punk community and the auction houses add clear value for the other party at the moment, but it bears watching how those market dynamics evolve given the disparity in transactional friction.
Still, with values climbing higher than those spring and early summer levels, we haven’t seen the last of Punks at major auction houses, particularly given that the market could always benefit from an expanding audience. Indeed, Christie’s will be hosting a “No Time Like Present” auction in September in Hong Kong, featuring CryptoPunks, Bored Apes, and Meebits (the first sales for the latter two outside of an NFT-trading platform). Their continued inclusion will only serve to solidify the perception of these assets as worthy of the sums commanded by their fine art predecessors, though it remains to be seen if that traditional fine art audience will ante up in earnest, or if those lots will be left to a crypto-centric or younger generation. The latter scenario doesn’t necessarily bode poorly, given the impending, generational transfer of wealth to come, which underpins the rising cultural, alternative asset investing tide.
For the crypto-centric, arenas for purchase and sale of Punks have expanded. As noted previously, the creation of Punks preceded the creation of the ERC721 standard, and therefore, Punks, in their original state, are not tradeable outside of the Larva Labs CryptoPunks platform. Since then, however, the arrival of Wrapped CryptoPunks have enabled Punks to be “wrapped” to the ERC721 standard – this makes them tradeable on popular marketplaces like OpenSea, and also allows users to submit a buy order price (bounties) for any random Wrapped CryptoPunk (the buyer would own any Wrapped Punk for which an owner accepts the offer). Essentially, Wrapped CryptoPunks are ERC721 tokens, backed 1:1 by the original CryptoPunk. To date, 254 Punks have been wrapped, and the belief is that this practice can reduce friction and increase liquidity in the Punk market; Larva Labs themselves attributed a September 2020 spike in sales to Wrapped Punks.
What’s going on with CryptoPunks recently?
The market for CryptoPunks has exploded over the last few weeks. What many thought was the peak of NFT activity in the spring (and was the peak for some products) has been dwarfed by sales volumes to close July and begin August. July saw $135mm in volume (note: USD not ETH), and already in August, there have been over $170mm in Punk sales. The previous high for a month was $98mm in March of this year.
Volumes aren’t the only metric seeing growth, it stands to reason given the fixed supply that the average price has risen considerably as well. To date in August, the average price of a Punk currently sits at $177k. In July, that figure was $97k, and back in March (the previous peak of activity), the average price was $68k. Additionally of note: in the June doldrums, average price didn't fall nearly as far as total volumes, indicating that many Punk owners were poised to hold through the turmoil, rather than capitulating at lower levels.
At the time of writing, the floor price available for a Punk is 47Ξ or just over $143k. Back in February, during a flurry of activity, that level was 23.5Ξ (or about $35k at the time). Mere days ago, the get-in-price was below $100k, but the proverbial floor has been swept, swept again, and swept some more.
So what the heck is going on?
First, it’s important to keep in mind that CryptoPunks are transacted in ETH. The price of Ether has rallied rapidly after falling well off of highs achieved in May. Though still roughly 25% off of those highs, the performance of the currency since mid-July is astounding. From 7/20 through 8/10, ETH was up 44%. Even more recently on August 5th, a major upgrade to Ethereum, termed the London hard fork, was activated, which aims to more precisely estimate gas (transaction) fees paid to miners, while also burning (removing from circulation) a portion of each transaction fee. From 8/4 to 8/10, ETH was up a further 24%. Without delving into the prospects for the Ethereum blockchain and its potential prominence in the future of decentralized finance, that increase in value makes the jaw-dropping CryptoPunk sales figures even more jaw-dropping in USD terms. Critical to keep in mind: that volatility cuts both ways. You're not just dealing with the volatility of a speculative asset, but a currency as well.
Obviously, though, Punk prices are up considerably in ETH terms as well. While the skeptics celebrated the relative plunge of NFT activity that crested in early 2021, NFTs are again having a huge moment. Whether or not the moment will be more sustainable than the last is uncertain, but what is clear is that there is a serious interest in top-notch assets in the space. While countless projects are seemingly hatched each day to varying levels of success, there is certain whale activity in established (used in a highly relative manner here) assets that is driving broader demand.
On July 30th, the third most expensive CryptoPunk sale on the marketplace was executed, with 2.25k ETH ($5.45mm) paid for an ape punk with gold chain and knitted cap. That same day, Gary Vaynerchuk executed the fourth most expensive sale, buying another ape, this one with knitted cap and small shades, for 1.6k ETH or $3.76mm. Gary Vee is among the most outspoken and well-followed NFT cheerleaders. Again on the 30th, another whale spent approximately $7 million, swiftly gobbling up 88 "floor" Punks. It has also been speculated that Three Arrows Capital was purchasing Punks on the 30th. Seven of the top twelve largest sales on the marketplace have been made since July 30th.
When big money starts chasing assets, it lends validation to the space. People often equate big money with smart money, and while that may not always be the case, it can often create a self-fulfilling prophecy, as market participants eagerly ride their wake, introducing new demand and pushing prices higher. It also encourages some already holding the assets to hold tighter in hopes of more whales at higher prices. It’s for this reason that the buyer who purchased 88 Punks reportedly paid Mining DAO to execute the transaction in one block – otherwise, sellers would notice the buyer’s intent and begin to raise prices (also known as frontrunning).
With all of these positive signals of intent in mind, buyers have consistently bought both at higher levels and at the floor, devouring any supply available at the entry price. Surely, with prices rising as expeditiously as they have, some flipping activity has ensured. For example, one zombie punk was sold for $1.98 million just two days after it was purchased for $1.04 million. Still, if many of those entering the market in recent weeks, particularly the whales, entered with the intention of owning a blue-chip NFT asset for the long term, and if they remain steadfast in that intent, a precipitous drop in prices may not lurk in the near future. Instead, the absence of readily saleable supply would encourage consolidation and perhaps further progress higher. With some of the incredibly ambitious sale prices (think eight or nine figures) offered by owners of the rarest and most coveted Punks, that may just be the reality.
What do we know about the CryptoPunks coming to Rally and Otis?
We’ve covered the macro setup for CryptoPunks, and now it’s time to delve into the implications for fractional investors. It came as little surprise to many to see fractional marketplaces embrace the possibility of owning and offering Punks to their investors; the NFT movement is difficult to ignore, and unquestionably, there are numerous parallels to assets already adored by fractional investors. But what kind of Punks will be available to the fractional community - are they worthy of a Twitter avatar update for their investors?
Rally – CryptoPunk #9670
Offering Market Cap: $72,000
The CryptoPunk offered by Rally is Punk 9670. It is one of 3840 female punks, one of 414 punks with crazy hair, and one of 572 punks with nerd glasses. Putting those together, there are just 10 female punks with both crazy hair and nerd glasses, though a few of those have additional attributes. According to rarity.tools, which ranks CryptoPunks by rarity based on scores and weightings for various attributes, #9670 ranks at 7350 out of 10,000 in terms of rarity. It derives the bulk of its rarity score from the crazy hair attribute, its skin tone, and the nerd glasses. While this rarity ranking may not at all be a perfect reflection of how the market views and, more importantly, values rarity, it can guide us to greater context.
There have only been twenty two sales in total of Punks with crazy hair and nerd glasses over the last four years, though five have been within the last month. The most recent sale for any Punk with those attributes was Punk #3645 on August 6th. That Punk, a male with a more commonly occurring skin tone, ranks 9150 in terms of rarity per rarity.tools. It sold for 84.84 ETH, or $235k at the time, which was a 70% return (in ETH terms, in USD it was an 86% return) over a 7/31 sale of the same Punk July 31st for 50 ETH. The similarly common Punk #1353 (ranking 9122) sold on August 2nd for 43 ETH, or $111,512, close to double its last April 2021 sale of 23.50 ETH or $58k. All of this demonstrates just how quickly things have been moving.
For other potential comps, we examined the Punks ranking around #9670 in terms of rarity, both the ten immediately preceding and succeeding. Of those twenty Punks, just two have sold since the start of July – both were on July 30th. Punk #8178, which ranks slightly rarer than #9670, sold for 30 ETH ($73k), while Punk #2127, which ranks slightly less rare, sold for 25 ETH ($61k). As discussed, July 30th was right around the moment the match that ignited the recent CryptoPunk boom was lit, so some ground in value would be covered since (as evidenced by the 70% return from 7/31 to 8/6 on the Punk mentioned above). Again, while these rankings may serve to add some mathematic rigor around how rare a punk is within the population, they do not account for the more subjective (and artistic) matter of valuation. That being the case, Punks more closely matching in terms of attributes may serve as better comps, but we wanted to offer multiple ways to evaluate the market. Worth noting: the average sales price by attribute chart from above does show that crazy hair is an attribute that seems to demand more value than its rarity would suggest.
Rally purchased Punk 9670 on July 13th for 32 ETH or $65k. The purchase level was a modest increase on the most recent sale, which was on March 11th for 29.99 ETH or $54k. The Punk was offered by the owner for 32 ETH on July 3rd. It appears Rally attempted to bid 31 ETH before ultimately withdrawing that bid and paying the requested 32 ETH, which ended up being $2k higher than their original bid in USD terms, but was actually $6k less than what 32 ETH was worth at the time the owner posted their offer.
Despite the considerable run-up in CryptoPunk values, Rally will offer #9670 at an initial offering market cap of $72,000, which in ETH terms today, is actually significantly less than what they paid. $72k today is 22 ETH, versus the 32 ETH paid. For context, if a buyer was too pay 32 ETH today for 9670,that would be $103k, or a 58% return. Suffice it to say, the cryptocurrency exposure (and the accompanying volatility) at hand here absolutely matters.
Decentralized application insights provider, DappRadar, estimates the value of #9670 at $183k, though without visibility to its methodology, it’s difficult to declare it reliable. Based on the current floor for Punk sales (over $140k) and recent transactions of Punks with similar attributes though, it appears that with the offering value at $72k, there would be a nice margin of safety built in for investors here. However, we saw how quickly things accelerated upwards, so it’s possible that such a margin can evaporate at a similar speed, particularly in a highly speculative market. The backdrop of activity the last two weeks paints a highly favorable picture, so it’s important to zoom out further.
Otis – CryptoPunk #543
Offering Market Cap: $51,500
The CryptoPunk offered by Otis is Punk 543. It is one of 6039 male punks, one of 643 punks with stringy hair, one of 288 punks with a mustache, and one of 2459 punks with an earring. Just three male punks (and three total) have that combination of attributes. Perhaps more importantly, as #543, this Punk is one of 1000 Dev Punks. The Larva Labs team originally kept the first 1,000 punks, which conveys an additional layer of significance. Rarity.tools ranks this Punk at 7595 in terms of rarity, not far behind the Rally example, BUT it’s incredibly important to note that their rarity score does not account for serial number or inclusion amongst the Dev Punk population, which feels like a potential oversight.
Unfortunately, there are no recent sales for the other two Punks with the same attributes as #543. The most recent, for Punk 7353, which boasts an additional attribute (a cigarette), was way back in February for 6.8 ETH or $12k. So, not much we can glean from that. Instead, we’ll look to Dev Punks with three attributes and a similar rarity score to that of 543. To do so, we widened our scope to those Dev Punks with three attributes ranking between 7000 and 8000 in rarity. There are just 34 such Punks. Of those 34, just three (!) have sold since the start of July. Most of them have actually never been sold; many of them were claimed and never moved, while many others have been claimed and only transferred. Such is the nature of Dev Punks.
The first to sell in July, Punk 610, sold for 28.88 ETH or $64k on July 4th. On ETH appreciation alone, that one would now be worth $94k. On July 30th, Punk 743, which features a similar composition of stringy hair, an earring, and a front beard, “sold” for 0.00 ETH. However, as recently as late April, it had sold for 20.21 ETH or $55k, which even at that point, is above the Otis market cap. Finally, Punk 715 sold July 31st for 29.90 ETH or $76k. 29.90 ETH is worth $96k today, and we previously referenced the difference in sale price for a Punk between 7/31 and 8/6.
The Dev Punks prove difficult to comp, due to their relative rarity and more importantly, the typically limited trading records. That being the case, it’s not surprising that there is no sales record for this particular Punk. It was claimed on June 23rd of 2017, and it has been transferred five times since (meaning no payment was conveyed on the marketplace), most recently on July 29th of this year. Luckily for all of us us, Altan has the Grails podcast, and Drew Austin, the seller of #543, appeared on our August 4th episode. He explained that NFT collector, Pranksy, purchased 150 Dev Punks, and offered tickets in February of this year to a drawing to secure one of the Punks. Pranksy referred to the spectacle as "The Million Dollar Punk Draw", tokenizing the tickets, which were tradeable on OpenSea and Rarible. Austin recollects paying 4 ETH (approximately $7k at the time). The tickets themselves appreciated to 17 ETH, but Austin held and received #543 in the drawing.
The offering circular from Otis does state that Otis purchased the asset for $50,000, payable in both cash and shares in the offering. Otis will offer #543 at an IPO market cap of $51,500, but the previous owner will retain 40%, so per the offering circular, the maximum offering size to the public is $30,500.
Still, at an offering level of $51,500, the Otis offering for #543 is a bit more than a third of the current floor for Punks and also the DappRadar estimate of $145k (may not take into account the Dev Punk status). Again, it bears noting that the