CryptoPunk’s NFT owner sells for $ 7 million in losses – but it’s a catch

A rare CryptoPunks NFT just sold for $ 3.3 million – a loss of $ 7 million for the seller when you include the falling price of Ethereum.

But when the tax season comes, the loss can end up saving the previous owner millions if they play their cards right.

Early Friday morning, Punk # 4156 – whose rare features include a “monkey” look and a blue bandana – was sold for 2691 ETH, about $ 3.3 million with ETH currently trading at around $ 1,200.

While, for the average person, $ 3.3 million may seem like a wild sum of money to one NFT– a unique blockchain token which means ownership – it was actually considered by some Punks collectors to be a low ball offer.

“Easily worth 25 million in my eyes,” tweeted borovik.ethwho owns Punk # 3938.

“$ 3.2 million is a joke for that monkey, but it can be tempting for the owner to accept,” Tank, owner of Punk # 4227, wrote on Twitter mail before the bid was accepted.

Before Friday’s sale, Punk # 4156 was bought back in December 2021 for 2500 ETH-value $ 10.26 million at the time, since ETH traded at almost three times the current price. This means that the current seller earned a relatively small profit in Ethereum, 191 ETH, but suffered large losses in the form of USD value.

So why did the owner sell for a loss of $ 7 million? It may have something to do with it tax loss harvest.

If the former owner of Punk # 4156 writes off the sale as a $ 7 million tax loss, it could end up as a financially beneficial move. Although the tax authorities for tax purposes can assess these losses that were realized at the time of NFT’s sale, the seller does not need to convert that ETH to USD to write off the loss.

This type of intentional loss, on paper, is a common practice used by traders reduce their capital gains liability. It is also possible that a reduction in capital gains of $ 7 million may even lower the seller’s tax rate, leading to additional tax benefits.

“It’s actually very smart for tax loss harvesting if he’s sure he does not want to give a positive return on investment anytime soon,” a Doodles NFT proprietor tweeted today of punk sales.

Although the seller may be participating in a good old game with tax losses, what about the buyer? $ 3.3 million in this economy?

Janik.sol, who claims to have bought Punk # 4156, sees the purchase as a gateway to “generational wealth”.

“I need a punk to transfer my savings to generational wealth. Why did I buy them? Because I know punks can be worth something. I will be here when the bear is over, ”Janik.sol twitret.

However, this is not the first notable CryptoPunk sale this week. Sales for the NFTs have picked up recently, as Punk # 4464 – another ape-style avatar – sold for $ 2.6 million Tuesday despite the ongoing crypto winter.

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