In Cryptocurrency Derivatives, Why Are Cash-Settled Futures More Common than Physically-Settled Ones?

Cash settlement is favored in cryptocurrency derivatives primarily due to the inherent logistical difficulties and regulatory hurdles associated with physically transferring digital assets. Transferring large volumes of crypto upon contract expiration requires managing wallet addresses, network fees, and security risks, which adds significant overhead.

Furthermore, for index-based futures, where the underlying is a basket of prices, physical delivery is conceptually impossible. Cash settlement simplifies the process, making it more efficient and scalable for financial institutions.