How Does the Custody Risk Change for a Physically-Settled Bitcoin Futures Contract versus a Cash-Settled One? ▴ Learn

How Does the Custody Risk Change for a Physically-Settled Bitcoin Futures Contract versus a Cash-Settled One?

A physically-settled Bitcoin futures contract requires the party receiving the Bitcoin to have a secure wallet and manage the private keys, introducing direct custody risk. The counterparty delivering the Bitcoin also faces the risk of a secure transfer.

A cash-settled contract eliminates this entirely, as only fiat or stablecoin is exchanged, typically within the exchange's or clearinghouse's managed accounts, avoiding the need for direct crypto asset management by the end-trader.

Does Physical Settlement Expose Traders to Greater Custody Risks?

How Does a Clearing House Handle Settlement for Physically-Delivered Vs. Cash-Settled Futures?

How Does the Margin Requirement Differ for Physically-Settled versus Cash-Settled Futures?

What Is the Primary Security Risk Associated with an Exchange Holding Private Keys for Physical Settlement?