Why a $30 million CryptoPunks auction fell apart at the last minute

Illustration by Mengxin Li / The Verge

There were fluorescent lights in the sales room at the time. A sea of spectators is not unusual for the auction house, but this sale was different. The evening sale was dedicated to NFTs.

The event was described as a truly historic sale. It was an all-or-nothing bundle of 104Cryptoks. The bundle was estimated to go for between $20 and 30 million.

The auction house threw a series of events to get people interested. There was a pre-auction dinner for Punk holders and an after party with DJ Seedphrase who is known for his huge headpiece. The crowd on the day of the auction included Nicole Muniz, the CEO of Yuga Labs, as well as NFT influencer Andrew Wang.

Eli Tan is a writer at coinDesk. He says the sale seemed like a secondary thing.

Things began to get weird. The sale started at 7PM. There were five minutes and 20 seconds. A voice on the loudspeaker said that the lot had been taken away. There were gasps in the sales room. No one knew why the sale was canceled.

There is no other explanation as to why the lot was pulled after discussions with the seller. The seller of the lot decided to hodl due to lack of interest, according to Artnet.

The New York Times noted after the failed auction that it is not uncommon for lots to be pulled ahead of sales. It was difficult to not speculate on the no-show at the auction houses. Kenny Schachter, art world provocateur and NFT collector who attended the sale, believes the seller pulled the lot after being told it was unlikely to sell for the low estimate. There was a rumor that the seller declined in advance of the failed auction, one that cleared $10 million but still fell short of the lower end of the estimate.

It should have been a point of pride for the collection. BAYC had sold a bundle of 101 token for $24 million, and fans were ready for a similar victory. Punk-holders felt burned at the auction. They were pretty upset. They were showing me their Punks and they said it was probably the last one.

There were other people watching them. The project ended up being acquired by Yuga Labs less than three weeks after the auction. The Yuga Labs team could have been at the sale to look at the Punks market.

The risks are worth it, and the anonymous seller seems to have come away from the auction just fine. The seller took out an $8 million loan against the Punks with the assistance of NFTfi and MetaStreet.

A way to give a collection an institutional "stamp of approval" is by selling at a traditional auction house. It is enough for an NFT from a collection to inflate the price and legitimize the entire collection.

The only reason they do it is because of the large houses. You pay 20% for that stamp of approval, but it makes all of your other coins worth 20 percent more, so it's more than worth it.

Before Christie's $69 million sale of Beeple's opus put NFTs on the mainstream art world's radar in March 2021, Sotheby's and Christie's were known as places to buy expensive rare objects. The NFTs of Pepe The Frog are being sold at the same time as other items.

It didn't happen in a day or two. With an increasingly young and international collector base, both Christie's and Sotheby's have had to update. Both houses now sell sneakers and pop culture items. They elevated T. rex skeletons into rarified cultural artifacts. The houses may look like they are trying to elevate NFTs to the status of Monet and Rembrandt, but that is not true.

They want a piece of the NFT market. If there was a market for it, they would want a chunk of it. They don't pay much attention.

According to Tim Schneider, art business editor at Artnet News, businesses like Christie's and Sotheby's have an interest in converting anyone with cash to spend into a power bidder.

The NFT sales last year brought in a lot of new buyers, according to the end-of-year report by the auction house. A high-level official at the auction house confirmed that part of their long-term goal is to make it easier for crypto-native collectors to transact and establish NFTs as a new category for the traditional art world.

The strategy may be working, as evidenced by the fact that one of the only examples we have is a record breaking Giacometti sculpture.

"For all of the lip service being paid to the idea of cross-collecting and people who started off in NFTs getting interested in other traditional artworks, we're not seeing a lot of organic integration between NFTs and the art establishment." After we spoke, Schneider reported in Artnet that the auction house did not acceptcryptocurrencies as a payment for any lots during their most recent evening sales.

The failed auction was embarrassing, but I still think that the houses got back more than they paid for. He says that the auction houses won't cry. They just move on to the next deal after one went down.