# How Does a Physically Settled Crypto Future Differ in Tax Timing from a Cash-Settled One? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## How Does a Physically Settled Crypto Future Differ in Tax Timing from a Cash-Settled One?

The primary difference in tax timing is that a cash-settled future realizes a final capital gain or loss on the settlement date. A physically settled future does not realize a final gain or loss on the contract itself until the underlying crypto is eventually sold.

The physical settlement is merely the acquisition or delivery of the asset, which starts a new holding period.

- [How Does the Timing of Settlement for a Crypto Future Impact the Tax Year of the Gain or Loss?](https://learn.greeks.live/path/how-does-the-timing-of-settlement-for-a-crypto-future-impact-the-tax-year-of-the-gain-or-loss/)

- [What Is a “Liquidity Bootstrapping Pool” (LBP) and How Is It Used for Capital Acquisition?](https://learn.greeks.live/path/what-is-a-liquidity-bootstrapping-pool-lbp-and-how-is-it-used-for-capital-acquisition/)

- [What Are the Tax Implications of Cash Settlement versus Physical Settlement?](https://learn.greeks.live/path/what-are-the-tax-implications-of-cash-settlement-versus-physical-settlement/)

- [What Is the Role of the Settlement Price Index in Cash-Settled versus Physically-Settled Options?](https://learn.greeks.live/path/what-is-the-role-of-the-settlement-price-index-in-cash-settled-versus-physically-settled-options/)

- [Does the Tax Treatment Differ If the Option Is Cash-Settled?](https://learn.greeks.live/path/does-the-tax-treatment-differ-if-the-option-is-cash-settled/)

- [Does Physical Delivery Create a Taxable Event, and If So, When?](https://learn.greeks.live/path/does-physical-delivery-create-a-taxable-event-and-if-so-when/)

- [If a Future Settles on December 31st, When Is the Gain or Loss Realized for Tax Purposes?](https://learn.greeks.live/path/if-a-future-settles-on-december-31st-when-is-the-gain-or-loss-realized-for-tax-purposes/)

- [What Is the Tax Implication Difference between Physical and Cash Settlement?](https://learn.greeks.live/path/what-is-the-tax-implication-difference-between-physical-and-cash-settlement/)

## Glossar

### [Physically Settled](https://learn.greeks.live/area/physically-settled/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Settlement ⎊ Physically settled derivatives contracts require the actual transfer of the underlying asset from the short position holder to the long position holder at maturity.

## Discover More

### [How Does the Timing of a Deposit Affect the Magnitude of Future Impermanent Loss?](https://learn.greeks.live/path/how-does-the-timing-of-a-deposit-affect-the-magnitude-of-future-impermanent-loss/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Timing of a Deposit Affect the Magnitude of Future Impermanent Loss?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Star-Formation-Analyzing-High-Frequency-Algorithmic-Option-Strike-Structures.webp)

The deposit time sets the reference price ratio; depositing before a large price divergence maximizes the immediate potential for impermanent loss.

### [Does the Underlying Asset's Liquidity Affect the Liquidity of Its Cash-Settled Future?](https://learn.greeks.live/path/does-the-underlying-assets-liquidity-affect-the-liquidity-of-its-cash-settled-future/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does the Underlying Asset's Liquidity Affect the Liquidity of Its Cash-Settled Future?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-View-of-Scanner-Lamp-Assembly-Reflecting-on-Glass-Platen-for-Volatility-Surface-Mapping.webp)

Yes, a liquid spot market provides reliable price discovery, which is necessary for a liquid and well-functioning futures market.

### [How Does Open Interest on a Cash-Settled Future Relate to the Potential for a Synthetic Squeeze?](https://learn.greeks.live/path/how-does-open-interest-on-a-cash-settled-future-relate-to-the-potential-for-a-synthetic-squeeze/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Open Interest on a Cash-Settled Future Relate to the Potential for a Synthetic Squeeze?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetric-Volatility-Surface-Modeling-Utilizing-Digital-Asset-Hedging-Mechanisms-and-Perpetual-Futures-Settlement.webp)

High short open interest amplifies the potential loss from index manipulation, increasing the market's vulnerability to a synthetic squeeze.

### [How Does a Bad Luck Streak in PPLNS Differ in Impact from One in PPS?](https://learn.greeks.live/path/how-does-a-bad-luck-streak-in-pplns-differ-in-impact-from-one-in-pps/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a Bad Luck Streak in PPLNS Differ in Impact from One in PPS?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Examination-of-Transparent-Acrylic-Components-Representing-Decentralized-Exchange-Liquidity-Pool-Mechanisms.webp)

PPLNS: Direct, immediate reduction in miner payout. PPS: No direct impact on miner payout, but strains the pool operator's reserve fund.

### [What Is the Key Difference between Cash-Settled and Physically-Settled Futures Contracts?](https://learn.greeks.live/path/what-is-the-key-difference-between-cash-settled-and-physically-settled-futures-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Key Difference between Cash-Settled and Physically-Settled Futures Contracts?](https://learn.greeks.live/wp-content/uploads/2025/10/Dual-Compact-Disc-Obfuscation-Modeling-Implying-Hedged-Digital-Asset-Volatility-Surface-Compression.webp)

Physically-settled contracts require asset delivery; cash-settled contracts only exchange the monetary difference in value at expiration.

### [Why Is the Risk of "Forks" a Consideration in Physically-Settled Crypto Futures?](https://learn.greeks.live/path/why-is-the-risk-of-forks-a-consideration-in-physically-settled-crypto-futures/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Is the Risk of "Forks" a Consideration in Physically-Settled Crypto Futures?](https://learn.greeks.live/wp-content/uploads/2025/10/Aerodynamic-Cryptocurrency-Derivatives-Interface-Analyzing-High-Frequency-Trading-Execution-Vectors.webp)

Forks create uncertainty over which version of the asset is the deliverable one, complicating physical settlement logistics.

### [How Does a Cash-Settled Option Differ from a Physically-Settled Option On-Chain?](https://learn.greeks.live/path/how-does-a-cash-settled-option-differ-from-a-physically-settled-option-on-chain/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a Cash-Settled Option Differ from a Physically-Settled Option On-Chain?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Autonomous-Organization-Governance-Mechanism-Propelling-Volatility-Hedging-Instruments-Above-Stratosphere.webp)

Cash-settled pays the difference in value; physically-settled requires the transfer of the underlying asset.

### [How Do the Delivery Mechanisms Differ between Physically Settled and Cash-Settled Futures Contracts?](https://learn.greeks.live/path/how-do-the-delivery-mechanisms-differ-between-physically-settled-and-cash-settled-futures-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do the Delivery Mechanisms Differ between Physically Settled and Cash-Settled Futures Contracts?](https://learn.greeks.live/wp-content/uploads/2025/10/Layered-Abstract-Representations-of-Cross-Margin-Collateral-Structures-in-Decentralized-Finance.webp)

Physically settled requires asset delivery; cash-settled involves a cash payment, simplifying the cost of carry calculation.

### [How Does the Settlement Price Mechanism Differ between Physically-Settled and Cash-Settled Futures?](https://learn.greeks.live/path/how-does-the-settlement-price-mechanism-differ-between-physically-settled-and-cash-settled-futures/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Settlement Price Mechanism Differ between Physically-Settled and Cash-Settled Futures?](https://learn.greeks.live/wp-content/uploads/2025/10/Dynamic-Bifurcation-of-Cream-and-Obsidian-Surfaces-Representing-Decentralized-Finance-Option-Strike-Pricing-Mechanisms.webp)

Physical settlement price is the invoice for asset transfer; cash settlement price determines the final P&L payment.

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**Original URL:** https://learn.greeks.live/learn/how-does-a-physically-settled-crypto-future-differ-in-tax-timing-from-a-cash-settled-one/
