Why Are Cryptocurrency Index Futures Typically Cash-Settled?
Cryptocurrency index futures are typically cash-settled because the underlying asset is not a single, deliverable coin but a basket of multiple cryptocurrencies. Physically delivering a fractional amount of several different coins to settle one contract is logistically complex and impractical.
Cash settlement simplifies this process, allowing traders to gain exposure to the overall market performance of the index without needing to handle the underlying assets.
Glossar
Cryptocurrency Index Futures
Index ⎊ Cryptocurrency index futures represent standardized contracts obligating the holder to buy or sell a basket of cryptocurrencies at a predetermined future date and price.
Cash Settlement
Settlement ⎊ Cash settlement, within cryptocurrency derivatives and options trading, represents the fulfillment of a contract obligation through a monetary exchange rather than physical delivery of the underlying asset.
Cryptocurrency Index
Valuation ⎊ Cryptocurrency indexes represent a weighted aggregation of digital assets, functioning as benchmarks for portfolio performance and the underlying market’s overall health.