CryptoPunks: everything you need to know about the popular NFT

Non-fungible tokens (NFTs) have exploded onto the cryptocurrency scene in 2021. After spiking to more than $176m in value in May, there was a lull in the market over the summer. And then, interest in buying NFTs skyrocketed to more than $1bn spent on total sales in the seven-day period to 29 August, according to data from NonFungible. A month later, sales remained above $200m on a rolling weekly basis.

As one of the earliest collections of NFTs, CryptoPunks are at the centre of the hype. So, what are CryptoPunks all about and why have they become so popular? Let’s look at the value of CryptoPunks and the pros and cons of trading them as an investment.

What is a CryptoPunk?

CryptoPunks are a form of collectible non-fungible token (NFT) with Proof of Ownership stored on the Ethereum blockchain. The collection comprises 10,000 unique 24x24 pixel digital art characters. The name derives from the punk style of the characters. There are also some special zombie, ape and alien characters in the collection.

Each CryptoPunk NFT has a profile page showing its attributes and ownership status. The digital images of the CryptoPunks characters are too large to store on the blockchain, so the developers created a composite image of all 10,000 of them and took a hash of the image that they embedded into the smart contract. The hash can then be used to verify that a CryptoPunk is genuine by comparing the hash with that one stored in the contract.

CryptoPunks were initially distributed for free to anyone with an Ethereum cryptocurrency wallet, but all CryptoPunks were claimed and now the only way to obtain a character is to buy one from a marketplace. CryptoPunks were one of the catalysts for the development of the ERC-721 standard that allows for the creation of unique NFTs for digital art and collectibles.

Where did CryptoPunks come from?

CryptoPunks was created in June 2017 by Canadians Matt Hall and John Watkinson, developers at US mobile software company Larva Labs. They were not concerned with how to make a CryptoPunk an investment asset, but generated the characters using an algorithm as a “weird but cool experiment in digital ownership on the blockchain”.

CryptoPunks are among the oldest NFTs, pre-dating CryptoKitties, which launched in  November 2017, and NBA Top Shot, which opened beta in June 2020.

What is their value based on?

According to Larva Labs, in the first three years after CryptoPunks was created, the total sales volume reached $866,000. In the fourth year alone, the figure soared to $361.7m.

Sales have now reached a total value of more than $1bn, based on transactions in 515,420 ether (ETH) coins.

The cheapest CryptoPunk for sale at the time of writing (28 September) was worth 104.99 ETH, or $323,000. The biggest CryptoPunk sale – of one of the nine alien special characters – was in June 2021 for $11.75m through London auction house Sotheby’s.

A CryptoPunk’s value is based on the price that buyers and sellers are willing to accept. The online community that has built up around them considers factors like the features of the digital characters and their accessories such as glasses, caps and earrings, to decide which ones carry more value.

In May 2021, Hall and Watkinson sold a set of nine of their CryptoPunks NFTs through traditional London auction house Christie’s, highlighting some of the features. The auction valued the NFTs at $16.96m.

Why have CryptoPunks become so popular?

The popularity of CryptoPunks has taken off as investors have become increasingly interested in buying and selling NFTs for profit. That interest has grown as the value of cryptocurrencies and NFTs has reached record highs this year.

Some traders and investors expect NFTs to become an established way of trading collectibles, disrupting the traditional art market. With the code stored on the Ethereum blockchain, anyone can check the authenticity and ownership of each of the CryptoPunks. Transaction fees are low compared with traditional art transactions. For example, the most expensive CryptoPunk traded online, CryptoPunk 3100, was sold on 11 March 2021 for 4,200 ETH, which valued it around $7.58m. The bidder paid a transaction fee of $27, and the seller paid a fee of $16 to accept the bid, equating to a commission of just 0.0006%.

CryptoPunks are particularly valuable because they are scarce – no more will be created beyond the 10,000 that already exist, and the ones that exist cannot be altered. This drives up the value as more investors look to buy one of the limited-edition characters.

CryptoPunks are the second-largest NFT collection in the world based on all-time sales, behind the Axie Infinity NFT-based online game, data from CryptoSlam shows.

As NFTs have attracted the attention of more investors and companies, payments firm Visa (V) bought its first NFT in August 2021 for 49.5 ETH, or $150,000.

Cuy Sheffield, head of crypto at Visa, said in a post on the company’s blog:

CryptoPunks pros and cons

Are you interested in trading or investing in CryptoPunks? What are some of the advantages and disadvantages of buying and selling them that you should consider?

What's the future of CryptoPunks?

The future of CryptoPunks will depend on the development of the market for NFTs. If NFTs are adopted as a secure way of buying and selling digital art for comparatively low commission costs, CryptoPunks are likely to remain popular.

Larva Labs has recently signed a deal with Hollywood’s United Talent Agency for representation across publishing, licensing, film, TV and gaming. The agency will also represent Larva Labs’ other digital art projects, Meebits and Autoglyphs. The agreement is one of the first to bring cryptocurrency-related intellectual property across to traditional media.

In a company blog post, Cuy Sheffield said that Visa has taken the view that “NFTs have the potential to become a powerful accelerator for the creator economy and lower the barrier to entry for individual creatives to earn a living through digital commerce.”

“NFTs are starting to usher in a new form of social commerce that empowers both creators and collectors.”

However, some investors take a sceptical view of the NFT market. Prominent US stockbroker Peter Schiff wrote earlier this year:

“The NFT rally should prove more ephemeral than the rise of cryptos themselves… I suspect that this mania will soon be shown for what it is: a speculative bubble on steroids. Maybe the ultimate collapse of the NFT market will be the pin that pricks the larger crypto bubble.”

When choosing which financial assets to trade or invest in, we recommend that you always do your own research, and consider the latest market trends, news, technical and fundamental analysis, and expert opinion. And never invest more than you can afford to lose.

How to buy CryptoPunks?

Are you bullish or bearish on the outlook for NFTs like CryptoPunks? Are you wondering how to buy a character yourself?

There are several online marketplaces where you can buy and sell CryptoPunks. The Larva Labs website lists the CryptoPunks that are available for sale and shows their transaction history. You can trade CryptoPunks on marketplaces like OpenSea, which is the world’s largest NFT market.

Once you have an account, you can connect an Ethereum wallet, such as MetaMask, to the platform. You can then place a bid on a CryptoPunk for sale, and if your bid wins, you pay in ETH from your wallet and take ownership of the CryptoPunk NFT. You can store the NFT in your wallet for security. You can use the Larva Labs site, as well as sites like CryptoSlam and CryptoArtPulse, to track a CryptoPunk’s price. This will help you decide on the CryptoPunk’s value and how much you would be prepared to pay for it.

In the meantime, if you are also looking to trade cryptocurrencies like ether, which facilitates transactions for NFTs like CryptoPunks, you can do so through contracts for difference (CFDs) on Capital.com.

CFDs allow you to speculate on short-term price direction without having to buy and sell the actual coin. Trading CFDs offers the opportunity to try to benefit from both bullish and bearish price action. You can either open a long position, if you expect the ETH price to rise, or a short position, if you expect it to fall.

As a leveraged product, CFDs are designed to maximise gains, which can be large on volatile products such as cryptocurrencies. However, you should be aware that using leverage increases the size of the loss if the price moves against your position. Be sure to do your own research before investing your money.

Make sure you understand how CFDs work before you begin, and never invest money you cannot afford to lose. Learn more about cryptocurrency CFDs with our comprehensive guide.

Create an account on Capital.com and stay on top of the latest market news to help you identify the best trading opportunities.

Read more: Best NFT projects: 10 names everyone should know in 2021

Markets in this article

ETH/USD
Ethereum / USD
3358.58 USD

282.46 +9.170%

V
Visa Inc (Extended Hours)
310.11 USD

2.52 +0.820%

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