Are there any drawbacks or risks associated with t+1 settlement in the cryptocurrency market?

5 answers

• Dec 24, 2021 · 3 years ago
  One potential drawback of t+1 settlement in the cryptocurrency market is the increased counterparty risk. With t+1 settlement, there is a longer period of time between the trade execution and the actual settlement, which means that there is a higher chance of the counterparty defaulting or experiencing financial difficulties during that time. This can result in delayed or failed settlements, leading to potential losses for the parties involved.
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• Dec 24, 2021 · 3 years ago
  Another risk associated with t+1 settlement in the cryptocurrency market is the potential for price volatility. Cryptocurrency prices are known for their volatility, and a lot can happen in the span of one day. If the settlement is delayed by a day, the price of the cryptocurrency being traded may have significantly changed, resulting in potential losses or gains for the parties involved.
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• Dec 24, 2021 · 3 years ago
  From BYDFi's perspective, t+1 settlement in the cryptocurrency market can provide several benefits, such as increased liquidity and reduced operational costs. However, it's important to note that there are also risks involved. One of the main risks is the potential for market manipulation. With a longer settlement period, there is more time for market participants to manipulate the price of the cryptocurrency being traded, which can result in unfair outcomes for other traders. It's crucial for exchanges to have robust monitoring and surveillance systems in place to detect and prevent such manipulation.
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• Dec 24, 2021 · 3 years ago
  In addition to counterparty risk and price volatility, another potential drawback of t+1 settlement in the cryptocurrency market is the impact on margin trading. Margin trading allows traders to borrow funds to amplify their trading positions. However, with t+1 settlement, the borrowed funds may need to be held for an additional day, which can tie up capital and limit the flexibility of margin traders. This can be a disadvantage for traders who rely on margin trading strategies to maximize their profits.
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• Dec 24, 2021 · 3 years ago
  While there are potential drawbacks and risks associated with t+1 settlement in the cryptocurrency market, it's important to weigh them against the benefits it can provide. T+1 settlement can improve efficiency and reduce settlement risks in the market, which can ultimately contribute to the overall growth and development of the cryptocurrency industry. It's crucial for market participants to carefully assess and manage these risks to ensure a fair and secure trading environment.
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