How do EFPs work in the context of digital currencies?

1 answers

• Nov 28, 2021 · 3 years ago
  EFPs, also known as Exchange for Physicals, are a mechanism that allows traders to exchange their digital currency positions for physical assets. This can be advantageous for investors looking to diversify their holdings or mitigate risk. EFPs work by matching buyers and sellers with opposing positions in the market. The buyer agrees to purchase the digital currency position from the seller, while the seller agrees to deliver the physical assets to the buyer. The transaction is settled outside of the digital currency market, typically through a separate agreement. EFPs offer liquidity and flexibility to traders, providing an alternative method for trading and managing positions. They also help mitigate counterparty risk, as the transaction is settled directly between the buyer and the seller. In summary, EFPs can be a valuable tool for digital currency traders seeking to diversify or manage risk.
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