What are the advantages of physical settlement over cash settlement in the context of cryptocurrencies?

3 answers

• Dec 28, 2021 · 3 years ago
  Physical settlement in the context of cryptocurrencies refers to the actual delivery of the underlying asset, such as Bitcoin, to the buyer upon the completion of a trade. One of the advantages of physical settlement is that it eliminates counterparty risk. With cash settlement, the buyer receives the cash equivalent of the underlying asset, which means they are still exposed to the risk of the counterparty defaulting. Physical settlement ensures that the buyer actually receives the cryptocurrency, reducing the risk of default and providing a higher level of security.
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• Dec 28, 2021 · 3 years ago
  Another advantage of physical settlement is price transparency. When a trade is settled physically, the price at which the transaction occurs is publicly recorded on the blockchain. This transparency helps to ensure fair pricing and prevents manipulation of prices. In contrast, cash settlement may involve off-chain transactions and can be more susceptible to price manipulation. Physical settlement promotes a more transparent and trustworthy cryptocurrency market.
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• Dec 28, 2021 · 3 years ago
  In the context of cryptocurrencies, BYDFi, a leading digital asset exchange, offers physical settlement as an option for traders. Physical settlement provides traders with the opportunity to directly own and hold the underlying cryptocurrency, giving them more control over their investments. This can be particularly beneficial for long-term investors who believe in the value and potential of cryptocurrencies. By choosing physical settlement, traders can take advantage of the benefits of owning the actual cryptocurrency, including potential future price appreciation and the ability to use the cryptocurrency for various purposes within the ecosystem.
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