Are Cryptopunks A Good Investment

CryptoPunks are involved by many credible businesses like

  • Chain CEO, Deepak Thapliyal bought CryptoPunk #5822 at $23.7m (via Nounft)
  • Shalom Mackenzie, the largest shareholder of DraftKings, bought Cryptopunk #7523 at $11.7m (via CNBC)
  • Dylan Field, CEO of Figma, bought CryptoPunk #7804 at $7.5m (via Protocol)
  • Visa bought Cryptop#7610 at $150,000 (via Bloomberg)
  • Gary Vee, the owner of VaynerMedia, bought numerous CryptoPunk
  • Tiffany and Co. recently sold out 250 customized pendants for Cryptopunk holders at $50,000/piece (via CNN)

Is CryptoPunk a Good Investment? 

CryptoPunks had been a great investment for its first buyer. It remains to be seen whether CryptoPunk will be a good or bad investment for its 2nd group of buyers at its high. Given the statue of the "first 10k NFTs" and many upcoming use cases of NFTs, I believed CryptoPunk will not be a terrible investment unless NFT communities does not survive.  

I kept missing my chance to buy CryptoPunk. When I first entered, I couldn't justify buying a Cryptopunk with their marketplace vs the upcoming NFTs. Then I got too much locked up in other NFTs as I did not feel it has the right risk-reward of Cryptopunk. In hindsight, a CryptoPunk might still be a good and safer investment in comparison to other investment

Floor Cryptopunks Generate Yield

Unlike stocks, bonds, and real estate, NFT assets generate yield via transaction fees. If you stake a floor CryptoPunk (i.e. NFTx.io) and someone buys a floor CryptoPunk, you earn a percentage of the transaction fee based on your proportion in the number of CryptoPunk staked.

For example, staking your CryptoPunks can earn a 1.18% APR by staking CryptoPunk only or a liquidity APR of 2.92% by staking CryptoPunk and Ethereum (albeit a risk of impermanence loss). The returns are returned when you sell the staked CryptoPunk token. However, you need to take note of the gas fees and the possibility of having to redeem stolen NFT assets that cannot be sold in some exchanges like OpenSea.

Cryptopunks are VIP Passes

Cryptopunks are becoming increasingly important to some businesses trying to attract them. They are often seen as being above average because they have access to digital goods and services that others do not such as Tiffany & Co recent act to sell CryptoPunk's pendants.

Digital VIP passes are becoming an unavoidable part of life and owning a Cryptopunk is considered to be a privilege, even though it is still relatively small compared to the mainstream population. Ownership of crypto assets is associated with wealth, success, and power.

Cryptopunks are Avatars

Cryptopunks are avatars you can share across different social media platforms. These avatars are easy to use and people will pay real money for them if they appreciate their legacy.

Cryptopunks Came First

CryptoPunks are the first 10,000 NFT collection, and many others have followed since. Even though many firsts like the first CC0 NFT or first on-chain NFTs did not stay mainstream, the CryptoPunk collection includes some of the most iconic digital collectors including companies like Visa.

Barring major changes in NFT, CryptoPunks is also expected to stay as the "first 10,000 NFTs" compared to the other NFTs that need to out-market each other to stay visible.

CryptoPunks are More Liquid

Cryptocurrencies are often referred to as digital gold, while NFTs are typically considered illiquid assets. However, CryptoPunk has survived many crypto winters and remains liquid at the right price. There is also a FloorDAO that frequently buys and sells various NFT collections which include CryptoPunk if prices fall compared to other NFTs.

A highly liquid NFT is one where you can change to money without selling at discount fees or high fees. This allows people to use CryptoPunk as a better way to store value than many other NFTs, except Bored Apes at the moment.

CryptoPunks are Limited

While scarcity applies to almost all NFT collections, CryptoPunks is the first and there is a desire to own them. Each CryptoPunk is also unique and different from each other, as part of being a non-fungible token.

The Future of CryptoPunks

Why would someone want to hold onto something that doesn't provide much utility? Why not just convert it into cash immediately? One reason is that NFTs are still relatively young without little risk of complete sell-off, compared to the chance of widespread adoption.

Another reason is that cryptocurrencies are fungible, compared to CryptoPunk which are non-fungible and each CryptoPunk unique. So while cryptocurrencies are a great asset class, it might not be as fun as owning an NFT.

CryptoPunks Price Floor Might Keep Dropping

CryptoPunks is a digital asset and an unexpected use case of Ethereum. These CrypoPunk tokens represent ownership of the first 10k collection and only time will tell if it will die off like other gimmicks like on-chain NFTs, cross-chain NFTs or CC0 NFTs. The price floor for CryptoPunks tokens fluctuates based on demand.

Trading Volume Keeps Dropping Too

Crypto markets are experiencing a drop in trading volume, according to CoinMarketCap data, which could indicate less buying and selling activity. Even OpenSea had to lay off 20% of its staff due to the NFT winters.

The drop in volume could be due to several reasons. First off, there is still uncertainty surrounding the future of cryptocurrency regulation. In addition, some investors might be waiting for the next big technology or NFT use case to emerge. Finally, it could simply be because people are holding onto their coins rather than spending them due to the recent economic recession.

There are many factors influencing trading volume. For example, the number of active traders on a particular exchange can affect how much money moves around. There is also the possibility of wash trading that pumps volume up unnaturally.

All-in-all, I am still unable to buy a CryptoPunk at the current price. That is a good problem to have, so I will focus on building for now. Would be glad to look at CryptoPunk again in a couple of months or years to see how it performs as an investment.

Author
Sky Hoon. Read Full Bio
Website Owner, Twitter-er
He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.

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