How to Trade With Crypto-commodities?
Crypto traders might be looking for something physical to trade. They started looking at commodities.
Farmers are starting to trade digital assets because they heard that they can grow rich digitally.
Some commodity traders were looking to trade something that is even more volatile than soybeans – and they started looking at crypto.
Woah! Everyone appears to think that the grass is greener on the other side. The commodity trader thinks it is easier to mine Bitcoin and the crypto trader thinks it is easier to mine metals out of the earth.
Meanwhile, we think it’s all about making your beans count, whether in the physical world or the digital world.
It’s always the poor beans that get caught in the crossfire! So, we have decided that we should discuss how we can combine commodities and crypto.
Yes, you can trade crypto vs commodities right here on Cerus Markets. And no, there is no mining involved. Instead, we will use CFDs to take positions in a commodity and a cryptocurrency simultaneously.
Does that sound interesting to you? Then read on.
Why Are Commodities Important?
We consume commodities every single day. Starting with the coffee that you drink when you wake up, the cereal or toast that you eat before heading out, the petrol that you use to drive your car, and the gold/silver that you show off in your bling at a party later in the evening, we use all sorts of commodities.
Some of the most popular commodities in the trading world are precious metals and oil. Gold is by far the most traded precious metal. It is closely followed by traders around the world.
Some of the largest consumers of gold are the people of India and China, two of the most populous countries on Earth. Central banks have also been on a gold-buying spree due to the latest developments in the currency markets.
After gold, silver is the second-most closely watched precious metal. It is a lower-priced precious metal when compared to gold. Silver is also viewed by some as a hedge against inflation.
Silver has quite a few uses in industrial applications as well. So, the demand for silver can sometimes be used to gauge the level of economic activity.
Oil is perhaps the most important commodity to follow. The global economy is powered by oil and its price impacts every country’s balance of trade, currency, and inflation.
Oil also impacts political choices as it is an important and regularly consumed resource. Even oil-exporting countries are impacted by the oil market because it can lead to power struggles, corruption, and significant revenue generation.
What Does It Mean To Trade Crypto vs Commodities?
Traders and investors are familiar with Bitcoin, Ethereum, Litecoin, Dogecoin, and most of the major cryptocurrencies. Traders who like volatility tend to like cryptocurrencies because of the relatively high volatility that they offer.
Seasoned traders and investors are also familiar with most of the major commodities. Experienced traders tend to regularly trade commodities or at least keep track of their price action.
However, wouldn’t it be interesting if traders could trade one cryptocurrency vs a commodity or take a simultaneous position in one cryptocurrency and one commodity? That is exactly what a Cerus Markets crypto vs commodity CFD can do.
Trading one asset vs another is a lot like trading in the forex market. For example, when you trade the Swiss Franc, you would usually do so against another currency. So, if you trade CHF/JPY, you are trading the Swiss Franc vs the Japanese Yen.
A CHF/JPY value of 100 implies that you need 100 Japanese Yen to purchase 1 Swiss Franc. The first currency, the CHF, is the base currency. The second currency, the JPY, is the quote currency.
In the case of a Cerus Markets CFD, ETH/XAU would mean trading Ethereum vs Gold. The value of ETH/XAU would indicate the troy ounces of gold needed to buy one Ethereum coin.
So, when someone says that they are trading crypto vs commodities, they would usually mean having crypto as the base asset and a commodity as the quote asset.
Interpreting Cryptos vs Commodities Trades
In crypto vs commodity CFD, if you are long ETH/XAU, then you either believe that Ethereum will rise faster than silver or silver will fall faster than Ethereum.
It could also mean that Ethereum rises but Silver stays flat or Ethereum stays flat but silver falls.
Similarly, if you are short ETH/XAU, then you either believe that Ethereum will fall faster than silver or silver will rise faster than Ethereum.
It could also mean that Ethereum falls while silver stays flat or silver rises while Ethereum stays flat.
The idea is that the ratio of ETH/XAU falls. In the case of a long trade, the ratio of ETH/XAU rises.
So trading one asset vs another is like trading a ratio. You are long one asset and simultaneously short another. Or you are long/short one asset while believing that the other asset will remain flat.
Possible Strategies To Trade Cryptos vs Commodities
At this point, you must be wondering if you now have a good basic understanding of commodities and what it means to trade them vs cryptos (or trade cryptos vs commodities).
Now, you must be asking yourself how to trade commodities vs crypto. How to trade this CFD that Cerus Markets is talking about?
You could start by looking at the price action of gold, silver, or oil. You would then look at the price action of Bitcoin, Ethereum, or Litecoin.
Then, after forming an opinion as to where these assets are headed, you could create a ratio and go long or short. This would be a discretionary trade.
System traders could try and use indicators. Moving averages work well to ride trends while moving average crossovers can be used to generate entry and exit signals.
One can also use stochastics, RSI, Bollinger Bands, Fibonacci, and multiple other indicators that Cerus Markets offers on its platform.
Trading crypto vs commodity CFD is just like trading any other asset. However, CFD is a leveraged product and you MUST follow proper risk management to protect your trading capital.
We hope that you found this primer on trading crypto vs commodities useful. If you are feeling confident about trading such a CFD and want to get started, then go ahead and open a new account with Cerus Markets. Our 100% welcome bonus offer will seal the deal for you.
Good luck trading!