Trading Chocolate -people do that?

XP Invest
August 14, 2019

We often get asked why we don’t offer BTC/USD trading pairs on the platform. The simple answer is that we’re trying to differentiate, which is true. But the other major factor is, why would you choose us over a Binance/Huobi etc.? Not at this stage anyway.

We have been identifying unique trading pairs that bring together the highly volatile cryptocurrency market, with the more traditional speculative markets. After going through several rounds of interviews with traders we have been able to identify a several different trading pairs that we will be introducing. One of them is‘Cocoa’. If you’re from the cryptocurrency world and are not very familiar with old school commodity trading this might sound strange to you. To bring you up to speed, let me give you a quick overview and background into what the drivers of the traditional ‘Cocoa’ industry were.

In 2018, Cocoa was one of the highest rising commodities being traded, the contract rose by more than 50% in four months. Cocoa as a product tends to have a high demand from more developed countries.

One of the major problems that the Cocoa market faces is stability in its prices. Although designed as a way for price discovery, the futures markets in Cocoa have not accomplished their goal. They have instead been used by speculators for price manipulation. The recent price volatility in the market been a result of multiple factors including unfavourable environmental conditions and the fact that price has been driven more by traders rather than people (farmers) involved in the underlying market. One of the major problems with this scenario is that there are large income disparities between cocoa export and import countries.

It was these disparities that led to the Ivory Coast and Ghana to come together to put in place a price floor for the global Cocoa prices. While the import prices are a minor matter for the importing nations, it can be critical for exporting nations.

Cocoa futures contract are primarily traded for physical delivery, owing to the volatility of the prices, the futures contract has been an extremely valuable risk management tool for exporters and producers. With the price floor coming into effect from two producers (Ghana & the Ivory Coast) that control close to 60% out of the output, it will be interesting to see if other producers follow suit or plan to undercut the two nations to boost demand. The price floor also comes at a time when global demand for chocolate has been falling. As a crypto trader why this might be interesting for you, the implementation of a price floor increases the possibility of a spike in the price of the Cocoa market.

indexmundi

‘XP Invest’ sources prices from these future contracts, we do not however provide any ownership of the underlying. Our platform can thus be used for purely speculative purposes, without an impact on the actual prices on the Cocoa.

If you’re interested in seeing what trading CC/BTC (Cocoa/Bitcoin) is really like, sign up for a demo account on our platform and give it a spin!

More on XP Invest

XP Invest offers you the ability to unique new pairs with your cryptocurrency, both in bullish and bearish time.

​​​​Learn more at, www.xpinvest.io

​Connect with us on telegram,

​​t.me/xpinvest

Disclaimer

This material should not be the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions, and is not related to the provision of advisory services regarding investment, tax, legal, financial, accounting, consulting or any other related services, nor is a recommendation being provided to buy, sell or purchase any good or product.Any views expressed on XP Invest blog are the personal views of the authors. The information and data herein have been obtained from sources we believe to be reliable. Such information has not been verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgment of the authors of the report at the date of this communication and are subject to change at any time without notice. XP Invest will not be liable whatsoever for any direct or consequential loss arising from the use of this publication/communication or its contents.

References

https://www.reuters.com/article/us-ivorycoast-ghana-cocoa-insight-idUSKCN1TT0RY

https://drive.google.com/viewerng/viewer?url=https://www.theice.com/publicdocs/ICE_Cocoa_Brochure.pdf