Definition ∞ Commodity trading involves the buying and selling of raw materials or primary agricultural products in financial markets. These assets, such as oil, gold, or wheat, are standardized and fungible, meaning each unit is interchangeable with another of the same type and grade. Trading occurs through various instruments like futures contracts, options, and spot markets, allowing participants to speculate on price movements or hedge against price fluctuations.
Context ∞ The discourse on commodity trading within the digital asset sphere often relates to the potential for tokenizing real-world commodities, thereby enabling fractional ownership and more accessible global markets. Analysts are assessing the regulatory frameworks required for such tokenization and the technological hurdles to ensure price discovery and liquidity. Future developments may see increased integration of commodity-backed digital assets with traditional financial instruments, impacting portfolio diversification strategies.
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