How Does ‘Physical Settlement’ of a Futures Contract Differ from ‘Cash Settlement’?

Physical settlement requires the actual delivery of the underlying asset from the seller to the buyer upon the contract's expiration. For crypto, this means the seller delivers the actual Bitcoin or Ethereum to the buyer.

Cash settlement, conversely, involves no physical asset exchange; only the monetary difference between the contract price and the final settlement price is paid in cash (fiat or stablecoin). Cash settlement is more common in crypto futures for simplicity and to avoid the logistics of asset transfer.