From Dormant Bid to Dead Wallet: How Three Arrows Capital Accidentally Bought a Neon Village NFT for 20 ETH

Remember the 2021 NFT frenzy? It was a wild time, with digital art selling for eye-watering sums and everyone trying to get in on the action. Well, the aftershocks are still being felt, and in a rather unexpected way. A forgotten bid from that era, linked to the now-bankrupt crypto hedge fund Three Arrows Capital (3AC), has suddenly sprung to life, resulting in the purchase of a ‘Neon Village’ NFT for a cool 20 ETH. Let’s unpack this curious story.

A Blast from the Past: The 20 ETH Neon Village Bid

Imagine placing a bid on an NFT during the peak of the market and then… forgetting about it. That seems to be what happened here. Back in August 2021, when NFTs were the talk of the town and Ethereum was riding high, a wallet associated with Three Arrows Capital placed a 20 ETH bid on a ‘Neon Village’ NFT. Fast forward nearly three years, and that bid has finally been accepted, automatically executed through a smart contract. In today’s market, 20 ETH is still a significant sum, but back then, during the height of NFT valuations, it was an even bolder move.

3AC’s NFT Collection: From Boom to Bust

Three Arrows Capital, once a major player in the crypto investment world, had amassed a substantial NFT collection. This was during a time when NFTs were seen as the next big thing, with celebrities, brands, and investors jumping on the bandwagon. However, as the crypto winter set in and 3AC faced its own financial meltdown, this NFT collection became part of the bankruptcy proceedings. To pay back creditors, 3AC was forced to liquidate its digital assets, including its NFTs, reportedly raising around $10.3 million in the process.

This fire sale highlighted a stark reality: the NFT market, like the broader crypto space, is highly volatile. Assets that were once valued at astronomical prices saw their values plummet. The story of 3AC’s NFT liquidation serves as a cautionary tale about the risks associated with investing in speculative assets, especially during market bubbles.

Neon Village: A Glimpse into NFT History

The ‘Neon Village’ NFT, now linked to this intriguing 3AC purchase, is part of the ‘Ninja Village’ collection by the artist Seerlight. Minted back on July 24, 2021, this ERC-721 token represents a piece of digital art created during a pivotal moment in NFT history. Interestingly, while the initial bids were relatively modest (0.07 ETH and 7 ETH), this particular NFT had previously changed hands for a whopping 100 ETH! This earlier sale, to the user @anonymoux, occurred when ETH was trading near $3,800, showcasing the peak valuations seen in the NFT market.

From 100 ETH to 20 ETH: The NFT Market Correction

The fact that ‘Neon Village’ once sold for 100 ETH and now traded for 20 ETH (even if due to a delayed bid) speaks volumes about the NFT market’s correction. The entire ‘Ninja Village’ collection has seen its floor price plummet, reflecting the broader cooling down of the NFT space after the 2021 hype. While some high-value NFTs still command significant prices, the overall market has become more discerning, with less speculative frenzy.

Is the Buyer Wallet Really Linked to 3AC?

Here’s where the story gets even more intriguing. Blockchain analysis from Arkham Intelligence suggests that the wallet that executed the 20 ETH purchase of ‘Neon Village’ may be linked to Three Arrows Capital. How so? This wallet reportedly sent a substantial sum of 2,615.65 ETH (worth around $7.8 million at the time) to 3AC back in August 2021, around the same time the original bid was placed. This connection, while not definitive proof of ownership, strongly implies a relationship between the wallet and the now-defunct hedge fund. It could be that the wallet was directly controlled by 3AC, or it might belong to a creditor or debtor of the firm.

Adding another layer of complexity, the current value of this wallet is quite low, sitting at around $23.98. Its largest holding is in CIA tokens, valued at approximately $21. This stark contrast to the millions of dollars once flowing through wallets associated with 3AC underscores the dramatic downfall of the firm.

What Happened to 3AC’s Crypto Fortune?

The vast majority of Three Arrows Capital’s assets are now under the control of Teneo, the conservatorship appointed to manage the bankruptcy process. The Teneo conservatorship wallet holds a significant amount of crypto, currently valued at over $229 million. This represents the remnants of 3AC’s once-massive crypto holdings, which included not only NFTs but also various cryptocurrencies and investments in other crypto projects.

NFTs as Collateral: A Risky Strategy

3AC’s foray into NFTs wasn’t just about collecting digital art. Reports suggest that the firm explored using its valuable NFT collection as collateral to obtain liquidity in the decentralized finance (DeFi) space. This strategy, while innovative, was also inherently risky. NFT valuations are notoriously volatile, and using them as collateral in leveraged positions could amplify both potential gains and losses. It’s believed that some of 3AC’s NFTs might still be held by counterparties like Nexo, who were reportedly in discussions to use them as collateral.

Pudgy Penguins and Beyond: 3AC’s NFT Portfolio

Beyond ‘Neon Village’, Three Arrows Capital was known to hold a diverse range of NFTs, including popular ‘blue-chip’ collections like Cryptopunks, Bored Ape Yacht Club (BAYC), and Pudgy Penguins. Pudgy Penguins, in particular, were a notable holding, with 3AC reportedly owning 100 of these penguin-themed NFTs. While some Pudgy Penguins reached peak valuations of 50 ETH, 3AC reportedly sold off its collection before this peak, potentially missing out on further gains. Despite market fluctuations, Pudgy Penguins remains a top-tier NFT collection, often ranking among the top 3 with a floor price exceeding 10 ETH.

The Sotheby’s NFT Liquidation

When 3AC’s NFT collection was liquidated, Sotheby’s, the renowned auction house, handled the sale of a significant portion of it. Some Cryptopunks from the collection fetched prices as high as $6.2 million, demonstrating that even in a down market, highly sought-after NFTs can still command premium prices. Interestingly, some individuals who purchased Cryptopunks from 3AC’s collection continue to use them as avatars on social media, showcasing the enduring cultural relevance of these early NFTs.

Final Thoughts: Lessons from the 3AC NFT Saga

The story of Three Arrows Capital and its NFT dealings offers several valuable lessons for the crypto and NFT space:

• Market Volatility is Real: The NFT market, like the broader crypto market, is subject to extreme volatility. Assets that skyrocket in value can just as quickly plummet.
• Dormant Bids Can Resurface: Smart contracts can execute transactions based on conditions set long ago, even if those conditions are triggered years later. This highlights the importance of managing and tracking on-chain activity.
• Risk Management is Crucial: Using volatile assets like NFTs as collateral for loans is a high-risk strategy that can backfire, especially in a bear market.
• The Legacy of the 2021 Boom: The after-effects of the 2021 NFT boom are still unfolding, with stories like this 3AC purchase serving as reminders of the excesses and exuberance of that period.

The accidental purchase of ‘Neon Village’ by a wallet linked to 3AC is a quirky footnote in the larger narrative of crypto market cycles and the rise and fall of prominent players. It’s a story that blends nostalgia for the NFT craze of 2021 with the sobering realities of market corrections and financial collapses. As the crypto space continues to evolve, understanding these past events is crucial for navigating the future.