NFT market's decline marked by hidden taxes and sales at a loss
As the non-fungible token (NFT) market keeps dropping this year, some investors are facing a double hit with extra tax bills, while others are selling their tokens at a multimillion-dollar loss.
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As the non-fungible token (NFT) market keeps dropping this year, some investors are facing a double hit with extra tax bills, while others are selling their tokens at a multimillion-dollar loss.
The United States Attorney’s Office for the Middle District of Pennsylvania revealed that a 45-year-old NFT investor, Waylon Wilcox, pleaded guilty to underreporting more than $13 million in income from sales of NFTs from the blue-chip CryptoPunks collection in 2021 and 2022.
By omitting this income, Wilcox managed to temporarily reduce his taxes by around $3 million.
However, now, the investor is facing the unpaid tax bill, a fine, and up to six years of imprisonment.
Per the announcement, in 2021, Wilcox sold approximately 62 CryptoPunks for around $7.4 million, while the next year, he raked in around $4.9 million by selling 35 NFTs from the same collection of 10,000 “punks.”
"When a taxpayer sells an NFT, including a Punk, then the taxpayer must report sales proceeds and any gains or losses from the sale of the NFT on their tax return," the attorneys stressed.
Meanwhile, another large, however unknown, NFT investor took a different kind of hit by selling their CryptoPunk #3100 at a huge loss for an unknown reason. Blockchain analysts have found that the NFT that was bought just a year ago for 4,500 ETH (almost $16 million) was now sold for 4,000 ETH ($6 million).
While the reason for the sale is not clear, some commentators on the X platform suggested that maybe the seller hopes to recover the lost capital faster by holding ETH, rather than the NFT itself. Another commentator also admitted that they've sold their assets at a loss as well—"just on a much more budget-friendly scale."
CryptoPunks are now the third-largest NFT collection by sales in the past 30 days, with $22 million and 165 transactions, according to Cryptoslam.io data. The current so-called price floor of CryptoPunks, which refers to the cheapest item in the collection, stands at around 42 ETH, or slightly more than a year ago, also recovering from 20 ETH in August 2024. However, the price is still down more than 50% since its all-time highs of 2021.
In either case, data shows that the whole NFT market keeps trending down:
