Commodities market form the basis of the international trade system. Knowledge of how to trade commodities is essential for any trader. Solid expertise promises a good chance of making profit, so let’s find out, which are the most widely traded commodities and why.
What are commodities and how did they evolve?
A commodity is a raw material, or a basic good in commerce that can be bought and sold by individuals and various institutions. They usually work as a basis for more complicated services and goods.
Commodities are usually grown, extracted, traded and produced in large quantities, supporting the efficiency of global trading markets.
The history of commodities goes back to the beginning of ancient civilization. According to research, rice might have been the first commodity that was traded around 6,000 years ago.
Later, the ancient Romans and Greeks, started using silver and gold as the currencies for commodities transactions. These metals eventually evolved into monetary assets that have become the preferred means of payment in commerce, making gold the #1 world’s traded commodity.
What are the main commodities?
Though the four major classes include dozens of various commodities, we’ve got another interesting player on the market – cryptocurrencies.
Cryptocurrencies: a new type of commodity?
The term cryptocurrency refers to a wide variety of digital tokens, designed to serve as a form of digital currency, payment network, store of value, etc. All the processed transactions are performed though blockchain technology, which serves as a giant digital ledger. The most popular cryptocurrencies, other than the most famous Bitcoin (BTC), include: Litecoin (LTC), Ethereum (ETH), Zcash (ZEC), Dash (DASH), Ripple (XRP), Monero (XMR), Bitcoin Cash (BCH), NEO (NEO), Cordano (ADA), and EOS (EOS).
Cryptocurrencies are a relatively new type of asset on the financial markets. Experts argue that cryptocurrencies should still be classified as currencies, however, they forget about the fact that one of the major features of any fiat currency is government regulation and centralisation, which doesn’t apply to the crypto world.
Some newest cryptocurrencies even tend to be closer to securities, because many ICO tokens resemble the role of shares in a company.