For a while now, the fixed increase in the price of coffee was subject to discussions all over the world – however, the end of the tail in November brought an increase in unprecedented prices with it.
During this period, the price of the Green Arabica reached 6.5 euros per kilogram, although it decreased to 4.47 euros earlier this year. Experts now say that coffee prices are turned out to look like a cryptocurrency.
“While coffee and Bitcoin markets may have nothing in common at first glance, what unites them, in fact, the continuous fluctuations of the price of”. The two reflect the general dynamics of speculative markets.
coffee It plays an important role in the global financial market. In 2023, the global coffee market was estimated at $ 100 to 200 billion US dollars. The highest coffee price was registered so far in 1977 and was 6.8 euros per kilogram. The beginning of the current increase can be traced to 2023.
How is the two markets similar, and what does that mean for traders and investors?
The dynamics of supply and demand
Coffee prices are greatly affected by changes in supply and demand. Countries that produce most coffee – such as Brazil and Vietnam – play a very important role here. The weak harvest, caused by opposite weather conditions (drought or frost, for example), can lead to a lack of global coffee and sudden nails in prices. On the contrary, the larger harvest may fill the market and cause a decrease in the price of coffee. Because of the changes in consumption patterns or economic conditions, the demand can also fluctuate, making the market more difficult.
Bitcoin market is vulnerable to changing demand. Unlike coffee, bitcoin supplies are limited and can be largely predictable: a maximum of 21 million coins. When it comes to demand, it is subject to speculation, and is affected as is the case in investor positions, institutional participation, changes in organization, and total economic trends. With an increase in demand, as well as the price; And if the enthusiasm is in the event of a fading, the price follows.
Speculative
Both markets are especially attractive to speculators. This may lead to more fluctuations caused by unexpected events or changing short -term positions or technical factors.
The speculators involved in the coffee market include hedge funds, institutional investors and a variety of other players. The markets that trade in futures such as speculators are able to bet on coffee prices, while traders often exaggerate the accuracy of weather reports and the impact of political geography, which again increases fluctuations.
Bitcoin market is very similar: as in the case of coffee, the price of bitcoin often comes as a result of public positions instead of the fundamental value. Publications of social media and updated regulations can radically change the price of bitcoin within hours. Moreover, due to the relatively low market capital, individual transactions can also have a great impact if it is large enough.
External factors and unexpected events
Coffee and bitcoin markets are very sensitive to different external factors and unexpected events.
The close relationship between coffee prices and weather conditions has been discussed. The case of one of the unexpected frosts in Brazil can destroy a lot of global coffee harvest, which leads to a significant increase in prices. The same applies to political turmoil or changes in export policy: such factors can disrupt the supply chain in countries that coffee coffee, and thus again lead to fluctuations. “The global offer from Arabica was affected by many harsh weather phenomena: in July 2021, Frost destroyed a large amount of harvest in Brazil, while Colombia has been subjected to 13 months of continuous rains. Not to mention Ethiopia, which has been suffering from dryness over the past five years , “Coffee Friend” is note.
Likewise, bitcoin price is greatly affected by technological progress (such as Blockchain Promings) and other external factors, such as local governments positions to mining or cryptocurrencies. Unexpected events may also play a role: these large platforms of cryptocurrencies may include collapsing or favorable organizational changes that come into effect, as the latter often leads to significant increase.
Inability to predict
Due to the complex interaction of a variety of different factors, it is difficult to predict coffee and bitcoin prices.
When it comes to coffee, sudden changes in weather conditions, geopolitical risks, and speculators’ procedures all contribute to the volatility of the market. For example, although traders expect a good harvest, sudden drought or pest spread can lead to an unexpected market revolution.
Bitcoin market is completely unpredictable: it may be affected by public positions, macroeconomic trends, and organization changes. Advanced tools for technical analysis may not be also helping, so it is likely that huge profits and huge losses are likely to be.
Volatility as an opportunity and risk alike
The fluctuation of the two markets creates valuable opportunities and great risks.
Producers and buyers themselves can protect themselves from sudden changes in the help of futures. Speculation, on the other hand, benefit from this volatility, and often use price fluctuations in their favor.
Bitcoin fluctuations attract those looking for high returns, yet the long -term investors tend to move away from the market. For their part, to reduce risks or profit from price fluctuations, institutions often resort to financial derivatives, such as options or future contracts.
Although coffee and bitcoin may be separated in the worlds, the common feature of volatility reveals similarities between the two markets. Both are sensitive to changing supply and demand, market speculation, and external shocks. “Whether the smell of a cup of fresh coffee or the Blockchain digital revolution, both can clarify the extent to which the financial system is not predicted.”