Non-fungible tokens (NFTs) emerged as a transformative force in the digital asset world. These unique tokens, authenticated by blockchain technology, managed to take the collectibles industry by storm… before it appeared to lose its attractiveness.

In this article, we'll delve into the key elements affecting NFT values and examine the current predicament of the NFT market in Indonesia.

What Drives NFT Value?

1. Scarcity and Rarity

NFTs possess specific attributes that differentiate them from any other token, creating a sense of exclusivity. 

NFTs with a limited supply also tend to command higher prices, as they are perceived as more valuable due to their rarity.

As per the Sydney Morning Herald (April 2022), a highly scarce NFT depicts a pixelated portrait of a bearded man donning sunglasses, a top hat, and smoking a cigarette. 

This unique digital asset is in the possession of a prominent NFT enthusiast and trader named Daniel, and its estimated value ranges from USD 500,000 to a staggering USD 100 million.

2. Creator and Brand Influence

NFTs associated with renowned artists, musicians, or influencers often carry higher value due to their established fan base and market credibility.

NFTs from reputable brands or established companies also tend to be more sought after.

Take an example: Syahrini, an Indonesian celebrity with over 43 million followers on Instagram. After introducing her own NFT titled 'Syahrini's Metaverse Tour' in 2021, she achieved approximately 17,800 sales, each fetching an average price of IDR 287,000 per NFT.

3. Utility and Interoperability

NFTs with usability across different platforms or games tend to have higher utility, increasing their overall value. Some offer perks such as access to exclusive content, special events, or in-game advantages, which can enhance their value.

In February this year, the Web 3.0-based football manager game, Garuda Eleven (G11) Metaleague, successfully conducted a soft launch. 

Since G11 Metaleague's introduction in December 2022, around 54 thousand user IDs have pre-registered, showing the growing potential of the NFT-based gaming industry in Indonesia.

4. Historical Significance

NFTs associated with culturally significant moments or events can hold considerable value due to their historical importance. Early and groundbreaking NFTs in a particular genre or category also hold a special place in the market.

A notable instance is the Curated Fact Narrative Project, also known as NFT Kompas, which recently won the 2023 Asian Media Awards.

The project, titled 'Indonesia in 57 Events', serves as a revenue diversification initiative, highlighting 57 significant events in Indonesia from 1966 to 2022.

All 57 news items were available on OpenSea, where they had been swiftly acquired by the market. Certain items have also been traded on the secondary market.

NFT Market: A Rising Star or A Dimming Potential?

While some significant NFT projects still hold a high value in the market, it's also evident that the current NFT landscape is not as vibrant as it was in 2021-2022.

According to the latest report from dappGambl, a crypto platform, 95% of NFT tokens held by 23 million people worldwide are currently of negligible value. The same report also indicates that 79% of the total NFT collection in existence remains unsold.

We can see an example in Indonesia itself, where in 2022, the Ghozali Everyday NFT's base price experienced a significant surge, with one selfie photo being sold for as low as 0.3 ETH (IDR 14.3 million).

Meanwhile, as of June 2023, a photo from the same collection is currently listed at its lowest price of 0.059 Ethereum (IDR 152.692), showing a significant drop in value.

The recent decrease in NFT transactions also coincides with a year-long trend of fewer buyers compared to sellers, indicating a shift in market dynamics.

This situation demonstrates a diminished demand for collections of lower quality, as over the past three months, 50% of the less liquid NFT projects have had a base price ranging from 0 to 0.5 ETH.

Will the NFT Market in Indonesia Recover?

Upon analyzing project distribution, it's apparent that the 50 largest projects make up less than 1% of the total projects on the NFT market. Interestingly, this 1% owns about 52% of the industry's overall market capitalization.

Typically, highly-ranked NFT projects maintain a certain level of liquidity and exhibit lower volatility, whereas the lower-ranked project tends to gradually diminish after issuance, making them highly susceptible to market fluctuations.

Christopher Tahir, a co-founder of CryptoWatch and manager of the Duit Pintar Channel, asserts that unless NFT pioneers shift their focus toward more tangible assets in the business sector, their application may be perceived as trivial.

According to Christopher, digital assets are still evolving, even though the industry has experienced a slight cooldown.

There is still hope for NFT, though exploring its potential, both in Indonesia and abroad, will require dedication and collaboration with multiple stakeholders.

For example, the Indonesian gaming market was projected to grow to more than USD 1 billion (IDR 14.1 trillion) in 2020, placing it as the fifth largest gaming market in the world. Shifting the focus to this realm could be one key to supporting the blockchain industry development in Indonesia.

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