Mark-to-Market Settlement

Mark-to-Market Settlement is the daily valuation of financial instruments at their current market price to determine the profit or loss for that period. In crypto derivatives, this process ensures that the value of collateral held in margin accounts remains sufficient to cover the potential obligations of the position.

When the market price moves, the contract value is adjusted, and funds are transferred between the buyer and seller to reflect this change. This mechanism is fundamental to the stability of futures markets and prevents systemic failure.

It provides transparency by forcing participants to account for market volatility on a daily basis. Without this, the risk of default would be significantly higher, as losses could compound unnoticed.