Why Are Bitcoin Futures on Some Exchanges Physically Settled While Others Are Cash-Settled?
The choice reflects the exchange's target audience and regulatory environment. Exchanges targeting institutional investors who may want to hold the asset often offer physical settlement.
Exchanges prioritizing simplicity and a broader retail audience, or those operating under regulations that prefer cash settlement, opt for the latter.
Glossar
Physically Settled Bitcoin
Settlement ⎊ Physically settled Bitcoin refers to derivative contracts where the actual underlying cryptocurrency, rather than a cash equivalent, is exchanged upon expiration.
Physically Settled
Settlement ⎊ Physically settled derivatives contracts require the actual transfer of the underlying asset from the short position holder to the long position holder at maturity.
Physically Settled Contract
Contract ⎊ This derivative instrument mandates the actual delivery or transfer of the underlying cryptocurrency asset upon exercise or maturity, rather than a cash settlement based on the price difference.
Regulatory Classification of Bitcoin
Compliance ⎊ The adherence of trading venues and participants to the legal stipulations imposed by the classification, whether as a commodity or security.