How to Cash Out Bitcoin
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What Does ‘Cash Out’ Bitcoin Mean?
Whether you were an early adopter of bitcoin and your 5 BTC investment is now worth a quarter of a million, or you have been making use of cryptocurrency faucets to build up your satoshis (smallest units of a bitcoin), having a balance of digital currency is great for investing and trading – but not necessarily for increasing your day-to-day wealth.
Cashing out your bitcoin or any other cryptocurrency simply means exchanging your balance for fiat (traditional) currency.
Whether you are looking to spend your trading profit or are coming out of digital currency completely, finding the best way to transfer your cryptocurrency balance into fiat currency can save you time and money.
With the right method, you can sell your bitcoin for local legal tender, and it can be transferred to you as cash, through your bank, via PayPal or directly onto a card to be spent like dollars or sterling.
What Are the Advantages of Cashing Out Bitcoin?
A cash-out of an investment is the quickest way to liquidate capital – whether it is tied up in stocks and shares or held in a blockchain.
While some businesses are catching on to the trend for digital currency and allowing some purchases to be made in so-called ‘stablecoin’ (a cryptocurrency that offers price stability because the value is backed by a physical asset), you cannot purchase much with altcoins (alternative cryptocurrencies to bitcoin) and you cannot pay bills.
For some people, the fluctuating cryptocurrency market might be a good reason to cut your losses and cash out for legal tender, but it is important to find out the best way to maximize your return.
Making the change from a digital currency to a more traditional currency is not necessarily straightforward, however, and understanding the different methods that are available will help you make the most appropriate decision for your circumstances.
How to Cash Out Your Bitcoin
Cashing Out Through an Exchange
Cryptocurrency exchanges are structured places that allow people and corporations to buy and sell cryptocurrencies, and this makes them great places to cash out your bitcoin.
Centralized exchanges have strict security protocols including identification of both buyers and sellers. They also need to follow strict anti-money laundering (AML) regulations.
Using an exchange to sell your bitcoin or other cryptocurrencies for fiat currency is more of an automated process so it is simple and straightforward – but it can take a while to be completed (usually three to five days).
Because of the AML regulations, you can usually only withdraw funds to the same account from which you deposited originally. This means that you will have to factor in extra time to register and get your account verified, and then make a deposit before you can start the withdrawal process after selling.
Coinbase is a well-known centralized exchange that has more than 43 million users across more than 100 countries.
It has a huge range of altcoins, and bitcoin, available to buy and sell. It also allows you to track your cryptocurrency investments while offering excellent education on all things crypto.
Fees include 0.50% of the spread and a charge of $0.99–$2.99 depending on the value of the transaction.
There are also fees dependent on location and withdrawal method. For example, withdrawals to a credit card balance will incur a higher fee.
Uphold was launched in 2015, and since then it has handled more than $4 billion in transactions, trading in 184+ countries with more than 30 currencies.
Uphold allows clients to trade directly between different asset classes in one transaction – so you can trade anything to anything.
With Uphold, you can trade 58 digital currencies, precious metals like gold, silver, platinum and palladium, as well as fractional equities in shares of US companies like Amazon, Tesla and Apple.
Uphold also focuses on Socially Responsible Investing (SRI) by providing an opportunity to trade on carbon tokens for more than just a financial return.
New traders will like the transparent pricing – there are no commission or account fees, and no withdrawal or deposit costs, but the trading fees are built into the spread. Uphold will present a complete price for each trade that includes fees, so you will know exactly what the trade will cost.
Uphold has a quite simple trading platform that is available on the web, as a desktop application, and on mobile.
Uphold also offers a debit card option, where you can pay for goods and services using any asset in your portfolio – and earn cashback as well as crypto on your purchases.
Cashing out bitcoin through Uphold is simple and straightforward, and you can withdraw as cryptocurrency or into your bank account.
If you want to move off-platform via crypto, there is a charge of $2.99 per transaction, and for bank transfer the fee is $3.99.
There might be some bank or blockchain fees that are set by a third party.
Kraken is consistently rated as a highly secure exchange, offering many different cryptocurrencies to buy and sell on their marketplace. They are one of the oldest exchanges available and have developed good relationships with traditional banking institutions.
Fees range from 0% to 0.26% depending on the volume and currency pair. Withdrawal fees depend on the cryptocurrency and the fiat currency, and there is a minimum withdrawal amount.
Coinmama is an exchange, but instead of being a marketplace that acts as an intermediary between buyer and seller, Coinmama is the buyer or the seller.
In real terms, this means that your transaction is with the exchange itself rather than other users.
Withdrawals are made directly to your bank account.
Commission is 0.1%–0.9% for sell orders, and there is no withdrawal fee.
A Bitcoin ATM (BTM) works like a normal ATM – except that instead of withdrawing cash from your bank account, you withdraw cash from your cryptocurrency wallet.
BTMs are a faster way to access your cryptocurrency balance than using an exchange, and they offer anonymity and privacy.
To use a BTM, you need to transfer the balance you want to withdraw to the BTM digital wallet, then it releases the required amount of cash.
Although it is fast, you still need to wait until the transfer has been completed to get access, which could take up to 30 minutes.
BTMs are not on every street corner like traditional ATMs, so access could be an issue.
BTMs can also run out of fiat currency and you may need to wait for them to be restocked. If making a large withdrawal, you could become a target for criminals.
A peer-to-peer (P2P) exchange works in a similar way to the above-mentioned exchanges but offers more anonymity as it does not need identifying information to complete the transaction.
P2P sales are usually more time-consuming, but they attract lower fees and the prices that can be achieved are generally higher.
P2P exchanges happen between users privately without an intermediary. Although there is an increased risk of scams, in most cases, you will find a rating system based on the online reputation of the other users so you can make a judgment for yourself about how trustworthy they are.
Security is managed in part by the funds being held in escrow until the transaction is confirmed by both parties.
LocalBitcoins is a trading site that allows people from different countries to buy and sell bitcoin using their local currency.
Based in Finland and operating since 2012, LocalBitcoins displays the reputation of each P2P user, and trades start with an advertisement.
LocalBitcoins describes its process as lean and fast, without any of the corporate oversight that can be found on other, more traditional, exchanges.
Several fiat-currency options are available, such as withdrawal to your local bank, PayPal and even gift vouchers.
There are no fees for registering, buying or selling cryptocurrency. Users who create advertisements are charged 1% of every completed trade.
A much more direct way to access your bitcoin as fiat currency is through a cryptocurrency card.
Instead of being attached to a bank account or a credit limit, a cryptocurrency card is linked to your digital wallet and converts the crypto to your desired traditional currency as you use it – in stores, online or even to withdraw cash from a traditional ATM.
You will find fees and limits that are similar to a normal credit or debit card, and there are different cryptocurrency cards available.
BitPay has an app available on Android and iOS that is linked to a prepaid Mastercard so that you can manage your cryptocurrency simply and easily.
There are no conversion fees, and there is a $10 order fee for a card. There are also miner and network fees, but these will depend on the digital currency you are using.
Wirex is available on iOS and Android, with a Visa card that allows you to spend in either fiat currency or crypto – and pays a 2% reward in WXT (the proprietary currency of Wirex) whenever you use the card.
A free account carries no monthly cost, but there are paid Premium and Elite options available that have extra features.
Things to Be Aware of When Cashing Out
When deciding about the best way to cash out your bitcoin or any other cryptocurrency, there are a few considerations that could impact your decision:
Any financial transaction that you make over the internet (or in person) needs to be done with security first and foremost in your mind.
For the most secure, and potentially the safest, online transactions, choosing to sell your crypto for fiat on a centralized exchange is the better idea.
With enhanced AML-regulation adherence and account verification, users are identifiable.
P2P exchanges are more anonymous and private, but they might be more prone to fraud.
If you are planning on cashing out your bitcoin by selling it in exchange for fiat currency, be sure to check out the exchanges you use as thoroughly as you would for any other financial service.
Another important consideration is where you are planning to receive your converted cryptocurrency.
Many traditional banks are suspicious of cryptocurrencies – brick-and-mortar banks tend to be highly regulated, and the decentralization of digital currencies is something that makes many banks uninterested in working with cryptocurrency exchanges.
In some cases, particularly for large withdrawals, banks have been known to block transactions due to ‘security concerns’ when they have originated from an exchange. Some users have even had their whole bank account frozen.
It is important to remember that more traditional banks are usually less crypto-aware, so if you are going to be receiving an amount of fiat from a cryptocurrency exchange, it might be worth speaking to your account manager to ensure the transaction goes smoothly.
If your bank decides they aren’t happy to receive a cryptocurrency withdrawal, you might need to open an account with another bank that is prepared to receive the transaction.
Mortgages, Immigration and Other Issues
If you are making a mortgage application or looking to get a loan, you might have to prove affordability with bank statements – and a withdrawal of bitcoin or another cryptocurrency may not be looked upon favorably.
Be prepared to explain large credits to your bank account to any financial institution or government service that needs access to your statements.
Local Tax Laws and Regulations
Any money you receive may be subject to taxation. It is important that you pay any applicable taxes for your location, bearing in mind that tax laws are different around the world.
If you are unsure of the specific rules for your country, talk to a lawyer or financial advisor to ensure you are compliant.
As a brief example:
US tax law – Cryptocurrencies are a capital asset that are considered property for tax purposes. Cryptocurrency miners have to report the cryptocurrency they mine as income.
UK tax law – There are no taxes relating to purchasing or holding cryptocurrency, but any sale is subject to profit tax and every type of crypto is considered a separate asset when subject to Capital Gains Tax.
Cryptocurrency exchanges and transactions are not allowed in certain countries or US states. This is due to a lack of consistent and coherent regulations.
It is important that you check whether your transaction is authorized in your location.
Top Tips for Cashing Out
Get Verified ASAP
Unless you are already a member of an exchange, you will have to register your details and get verified before you are allowed to cash out your cryptocurrency.
The time frame for verification differs from site to site. Make sure you have the relevant identity documents to hand so that you can upload them straight away and avoid any delays.
If you are new to an exchange, you may have to make a deposit from the account you want to receive your cryptocurrency balance before you withdraw. This can also take time.
While it might be tempting to go with the transaction that gives you the most fiat currency in exchange for your bitcoin, you could lose a chunk of your balance if you do not check the fees.
The best price doesn’t always mean the best return.
Cashing out your bitcoin, especially through an exchange, is not an immediate process. Relying on your cryptocurrency balance to pay bills or get you out of a financial hole is not good money sense.
When you look at the timeline of a withdrawal from your BTC balance, you need to factor in:
- The certification time for your account to be authorized
- The hold time for both depositing funds and withdrawing them (as much as five days each)
- The time it takes for your bank to authorize the transaction
Of course, if you can access a BTM, you will get the funds much faster, but the lack of local BTMs makes this a less reliable method unless you happen to live in a big city.
Possibly the fastest way to get access to your cryptocurrency balance is through a multicurrency card that allows you to spend directly from it.
However, you still need to open an account and wait for the card to be sent to you before you can start shopping.
Cashing out your bitcoin for fiat currency can be more hassle than using a traditional bank account, but it is definitely achievable with the right planning and some patience.
You can make the most out of your cryptocurrency balance by deciding on the best way to cash out – whether through a traditional exchange, a P2P service or by using a BTM.
A great option (and emerging market) seems to be the cryptocurrency card, which lets you spend your digital currency in the same way as fiat currency.
It seems to be relatively cheap and much faster than selling and cashing out your balance, but there are limits to the amount you can spend and withdraw from a traditional ATM.
Choosing the right way to cash out your bitcoin makes the process quicker and smoother.