The biggest problem with having a currency that is dependent on commodities is price volatility. Money is a type of asset in an economy that is used to buy goods and services from other people. Source(s): disadvantages commodity money: https://shortly.im/edXib. A commodity is a basic good that can be bought and sold. For the best answers, search on this site https://shorturl.im/4ykj1. Disadvantages of commodity trading. This sometimes leads to unnecessary risk-taking. Leverage – margin requisites by the exchanges are kept low, thereby, causing poor money management. Speed of trading. Advantages and disadvantages of commodity money; Commodity money and Fiat money; History of commodity money. Can be a double edged sword. The Pros & Cons of Investing in the Money Market The Pros & Cons of Investing in Real Estate The Pros & Cons of Investing in Commodities. Money as a medium of exchange first came into human history in the form of commodities. some disadvantages of commodity money are its not portable, durable, or divisible, it usually works in small economies Some examples of commodity money used throughout history have been salt, gold, cryptocurrency, copper, tea, shark teeth, cocoa beans, tobacco, barley, and large stones. Definition of Commodity Money. 0 0. Anonymous. The most important advantage of commodity money is basically that it serves an additional purpose. Leverage. A great variety of items have served as money at one time or another: cattle, olive oil, beer or wine, copper, iron, gold, silver, rings, diamonds, and cigarettes. The purchase and sale of commodities is usually carried out through futures contracts on a commodities exchange. Cattle are not divisible into small change. Money can be broadly classified as commodity money, representative money, fiat money, or electronic money. A commodity is a physical item … Tags. For example, gold can be turned into jewelry, while cigarettes can be smoked. This can also be seen as a disadvantage. When the price of oil goes up a lot, so does the value of the Canadian dollar. It is important to know how the concept of commodity money came into existence and also about the usage of commodity money in ancient and medieval times. Each of the above has advantages and disadvantages. Commodity money has intrinsic value, such as salt in the Mediterranean region, silk in China, or gold and silver throughout the world, because these commodities have a value that is independent of its value as money. Commodity money, in short, is any money that gains its value primarily in virtue of the substance the money is made of, or the potential use of the money. This gives the holder added options; he can either use or spend the money. Not only are profits enhanced but so are losses! 5 years ago. Disadvantages . Commodity Money. Low margin requirements can encourage poor money management, leading to excessive risk taking. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity …