What Is Physical Settlement in a Futures Contract?
Physical settlement is the process where the actual underlying asset, in this case, the cryptocurrency, is delivered from the seller to the buyer upon the expiration of the futures contract. This contrasts with cash settlement, where only the monetary difference is exchanged.
Physical settlement is less common in crypto futures due to the logistical challenges of asset transfer and custody.
Glossar
Physical Settlement
Delivery ⎊ The concept of physical settlement, particularly within cryptocurrency derivatives and options, signifies the actual transfer of the underlying asset ⎊ be it a digital token or a commodity ⎊ rather than a cash-based offset.
Physical Settlement Impact
Delivery ⎊ This refers to the actual exchange of the underlying cryptocurrency for cash or the settlement asset upon the option's expiration or exercise, as opposed to a cash-only settlement.