What Is the Difference between Cash-Settled and Physically-Settled Futures?
Cash-settled futures do not involve the physical delivery of the underlying asset; instead, the difference between the contract price and the settlement price is paid in cash. Physically-settled futures require the buyer to take delivery of the underlying asset and the seller to deliver it upon contract expiry.
Crypto futures are predominantly cash-settled.
Glossar
Underlying Asset
Futures Pricing incorporates the cost of carry, which in crypto markets includes funding rates derived from perpetual swap markets and the time value associated with holding the spot asset.
Settlement Price
Price ⎊ The settlement price, within cryptocurrency derivatives, options trading, and broader financial derivatives contexts, represents the final agreed-upon value at which a contract expires or is otherwise terminated.
Crypto Futures
Product ⎊ Crypto futures are standardized, exchange-traded contracts obligating the holder to buy or sell a specific quantity of a cryptocurrency at a predetermined price on a specified future date.