For those who often deal with trade, one of the terms often heard is a commodity.

Commodities are assets/goods that are traded anywhere, even between countries.

Therefore, often these assets will be a source of income for a country with great value.

Please note that commodities are important in world trade because they often have high economic value.

In addition, commodities will also provide opportunities to diversify investment portfolios and act as a hedge against inflation.

This can happen because commodities are an integral part of international trade and the subject of speculation in financial markets.

So, to better understand what a commodity is, its types, to the potential of crypto as a commodity and investment asset, see the following review.

What are Commodities?

The commodity is defined as all goods/services/other rights/interests and all derivatives of commodities that can be traded and become the subject of futures contracts, sharia derivative contracts, and other derivative contracts.

Meanwhile, a commodity is a product/goods that can be traded for profit. The buying and selling of commodities can also be done by exchanging them for products/goods of the same value.

The factors that make an item into a commodity include standardization of quality and clear specifications, homogeneity, and a high level of liquidity.

On the other hand, an item can become a commodity because there is a broad demand, and the market needs it.

The role of commodities in the global market is to make a significant contribution, including meeting the basic needs of the global community. Then, commodities also become an integral part of international trade.

Furthermore, commodities can also be used as economic diversification; their prices affect the global inflation rate and are a macroeconomic indicator and market sentiment.

Commodity Types

Understanding the types of commodities is important, especially for those involved in trading.

With a good understanding, it is hoped that world trade actors can make better investment decisions.

The types of commodities can be viewed from their nature and are classified into two, namely the types of hard and soft commodities.

The following is an explanation regarding the types of commodities that need to be known, namely:

1. Hard type

The hard type refers to commodity products that are natural resources, namely mining, extraction, and other products.

Examples of commodity products in this hard type, namely precious metals, petroleum, and so on.

2. Soft type

The hard type refers to commodity products resulting from agriculture, animal husbandry, and forestry.

Commodity products in this soft type include, for example, rice, sugar, soybeans, salt, cow’s milk, rubber, corn, coffee beans, palm oil, fish, teak wood, chicken meat, and others.

Types of Commodity Products

After knowing the definition and types, now is the time to understand the types of commodity products.

Understanding these commodity types is important, especially for commodity market players.

This understanding will later help to make better investment decisions related to commodities.

The following are the types of commodity products that need to be known, including:

1. Metal

Regarding metals, the commodities include metallic products/goods originating from mining activities.

In this case, metal commodities are divided into two, namely industrial metals and precious metals.

Industrial metal products are aluminum, copper, magnesium, nickel, cobalt, tin, and titanium.

Meanwhile, the precious metal commodities can be gold, palladium, platinum, and silver.

2. Agriculture

The second type of commodity is obtained from agricultural activities. This type of commodity is used to meet human needs.

The types of agricultural commodities are also divided into two, namely forestry products and agricultural products.

For forestry product commodities, examples are palm oil, rubber, rattan, cotton, and others.

Meanwhile, commodities from agricultural products can be coffee, rice, soybeans, corn, wheat, sugar, and others.

3. Mining

The next type of commodity is mining. This type of commodity is also divided into two, namely precious metal and industrial commodities.

For precious metal mining commodities, examples are gold, platinum, palladium, and silver.

On the other hand, for industrial metal mining commodities, examples include iron, copper, aluminum, titanium, magnesium, tin, nickel, carbon, etc.

4. Energy

Similar to metal commodities, energy commodities are all products obtained from mining and exploration activities.

The products in this type of energy commodity can later be used as fuel.

Commodity Trading System

Understanding the commodity trading system is very important, especially for those involved in commodity trading/investment.

Therefore, it is very important to comprehensively understand the commodity trading system so that market participants can operate well in the commodity market.

The reason is that with a good understanding, market players can manage risks and make measurable investment decisions in commodity trading.

Please note that commodity trading is unique in its system, which is different from ordinary trading.

Related to that, if normally the selling price of a merchandise is determined by the seller/manufacturer, then for the commodity, the price will depend on the amount of demand/supply in the market.

Therefore, commodity traders are familiar with the risk of price fluctuations.

Several factors cause fluctuations in commodity prices, including production capacity, weather, seasons, government incentives/restrictions, political conditions in a country, and others.

This then causes commodity trading to have a futures contract. There are basic standards regarding the quantity and minimum quality of commodities to be traded.

Regarding commodity trading, there are two types of traders in this market type: producers and speculators.

For producers, this futures contract will be used to protect the value/price of the commodity until the end of the contract period.

Meanwhile, speculators are traders in the commodity market who carry out trading activities to profit from price fluctuations.

Crypto Potential As Commodity and Investment Assets

Until now, since the last few years, the popularity of crypto assets has expanded throughout the world as a form of investment and trading.

This is also in line with the increasing adoption of blockchain technology. In addition, its security factor puts crypto assets in demand as a form of investment.

In addition, the ease of access and crypto trading that can be done online through a crypto trading/exchange platform has also boosted the popularity of crypto as an investment asset.

Please note that Indonesia has included crypto in the commodity category. Thus, crypto can also be traded.

Crypto trading can be done on a crypto exchange platform with official permission from the Commodity Futures Trading Regulatory Agency (Bappebti), one of which is INDODAX.

In this case, crypto can be used as an investment asset or for trading activities. Furthermore, by establishing crypto as a commodity, it will also positively impact the community because they will feel more secure investing in this digital asset.

It is also important to note that in recent years, crypto investment in Indonesia has experienced drastic developments.

This is marked by the high public interest in adopting crypto as an asset and trading commodity. Then it can also be seen in the growth of regulated/licensed crypto exchange futures exchanges in Indonesia.

Furthermore, the development of crypto regulations indicates that crypto investment in Indonesia is so high.

Conclusion

In conclusion, a commodity is a product/item that can be traded for profit.

The buying and selling of commodities can also be done by exchanging them for products/goods of the same value.

Commodities have a big role in the economy because these assets have high economic value.

In addition, commodities will also provide opportunities to diversify investment portfolios and act as a hedge against inflation.

This can happen because commodities are an integral part of international trade and the subject of speculation in financial markets.

On the other hand, understanding commodities, including crypto, is very important for investors and market participants.

With a good understanding of commodities, including crypto, investors and market participants will be able to manage risk and make better decisions.

So, now you understand what a commodity is, its types, to the potential of crypto as a commodity and investment asset.

Furthermore, you can also read other interesting articles about learning crypto only at INDODAX Academy.