One of the biggest commodity trading games of the 21st century is undoubtedly cryptocurrency, which is often miscategorized as a currency. Instead, this commodity is taking the world by storm with a market cap of just below $120 billion. As a virtual commodity, some traders are still a little hesitant to dip their toes into the cryptocurrency and blockchain waters, and with good reason. There is a fair amount of risk in this type of trading, but those who end up on the winning side stand a chance of significant gains. Is the winning side actual commodities or virtual?
Both Are Finite
One of the main reasons commodity trading is in high demand is that traders realize that commodities such as Brent Crude oil and precious metals are essentially finite. This means that at some stage, these will cease to exist and the world will need to find another way to fill that need. Much like with Canadian silver coins at Money Metals Exchange, bullion provides a stable investment solution for traders. Those who find themselves on the crypto side will also find this commodity finite, which is why the demand pushes the prices up so high. The only difference is that cryptocurrency doesn’t satisfy physical needs quite as effectively as physical commodities, which keeps traders on their toes.
A Diverse Portfolio For A Well-Rounded Strategy
One of the most important lessons any trader can learn is that there is a benefit to having a diverse portfolio. This is because, no matter how good the markets are doing at that point in time, there is a slight chance that they may experience a downturn. If traders happen to lump all their funds into a single commodity, or even single type of commodity, they stand the chance to lose all their capital. Real commodities such as Brent Crude oil, agricultural products, and precious metals may rank high in terms of stability, but as the markets reveal this is not a foolproof solution. Traders who happened to back sugar stocks in 2018 would have had a tough time as these were the worst-performing commodities. For crypto traders, those who managed to get their hands on Ethereum would have enjoyed the recent upswing.
For investors, it’s not so much a choose a one-or-the-other, but rather how much of each type of commodity to add to their portfolio. Commodity trading, whether crypto or physical, have highs and lows and the key is to keep a close eye on market movements.