Several investors made good money in 2023 due to the dramatic recovery in cryptocurrencies. There are several methods to turn your cryptocurrency into cash, even though values have fallen from all-time highs reached in late 2021. Crypto investors may be seeking ways to profit from the present market enthusiasm.
Knowing the tax ramifications is important if you’re selling any asset. If you’re booking a capital gain, you can owe a lot, and the tax rate will vary depending on how long you retain the asset, among other factors. Undoubtedly, in the event that you are selling at a loss, you could be eligible to claim a write-off. Still, it could be wiser to wait if you believe that cryptocurrency will continue to bounce back.
How to sell Bitcoin: Easy Ways to ‘Cash Out’ your BTC Holdings
One of the first things that people ask when they want to purchase cryptocurrency is, “How do you sell Bitcoin?” since withdrawing your money is just as crucial as making an investment. Although the procedures are somewhat in a reversed direction, purchasing and selling Bitcoin might be comparable. You must first have Bitcoin in your wallet before you can sell BTC.
There are several ways to buy Bitcoin. When you’re ready to sell part or all of your Bitcoin, you may do so using a Bitcoin ATM, direct peer-to-peer (P2P) transactions online or in person, or an online cryptocurrency exchange.
Cryptocurrency exchanges: Revolutionary platforms
Although they have a few drawbacks, exchanges are your one-stop shop for trading cryptocurrency. Exchanges serve as a middleman when selling cryptocurrencies, holding the money from both buyers and sellers.
Creating an account on the platform of your choosing is necessary to utilize crypto exchanges. Identity verification is mandatory for many trustworthy exchanges. A bank account must be connected to withdraw crypto funds into cash. Nonetheless, be aware of any country-specific exchange limitations, as some crypto exchanges prohibit users from accessing their platform.
After you have opened an account on an exchange and have moved your digital currencies to that exchange (or if you already have an account with Bitcoin kept in it). Simply issue a sell order indicating the kind of currency you want to trade, the amount you want to trade, and your asking price per unit. The exchange will automatically finish the transaction as soon as someone accepts your offer. However, with several order kinds and other features, trading cryptocurrency may be far more complex than this simple explanation suggests.
It is necessary for you to withdraw the cash to your linked bank account after they are credited to your account. There are situations where this can take far longer than necessary, particularly if the exchange is having difficulty with liquidity or its banks. This was the identical issue that the Mt. Gox exchange was having several months prior to filing for bankruptcy.
Additionally, some financial institutions flatly decline to handle transactions involving money earned through crypto trading.
Furthermore, you should be aware of any withdrawal costs that could apply at the platform of your choosing. The maximum quantity of money you may withdraw from an exchange within a given time frame may also exist. If you stick with a certain platform or upload more documents to fulfill the criteria for Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, the limit can be raised over time.
Ultimately, it’s critical to keep in mind that exchanges are by no means a safe, dependable location to keep your money, even when they do provide wallet services. They are susceptible to hacking attacks, and there have also been cases when exchanges have closed because their proprietors have embezzled or mismanaged customer assets.
An additional way to sell your crypto involves selling it into a stablecoin on an exchange and removing your holdings to a personal wallet off the exchange. Another option is just to retain the money on the exchange, although there are advantages and disadvantages to this option as well. It’s best to assume complete responsibility for your own finances and to put any money that you don’t need right away in a safe offline wallet. Additionally, you have more control over your money when you remove money from the site and save it in a personal wallet.
A stablecoin is a type of digital asset whose value is linked to that of an underlying asset, usually a fiat currency like the US dollar. You may trade your digital currencies for several stablecoins. Another indirect way to sell crypto using the facilities provided by Btc exchanges is to use one of the many crypto-focused payment cards on the market.
The ways in which these cards function are multiple. Generally speaking, at the point of sale, users’ assets are converted into cash, allowing them to be used in establishments that accept conventional credit and debit cards. As an alternative, several cards let users put stablecoins onto a card that supports cryptocurrencies, shielding them from the volatility that comes with cryptocurrencies.
Direct trades (person-to-person)
One further method to withdraw BTC and sell is to do an online or in-person direct deal with another party. This may be accomplished in a few different ways, such as by arranging a face-to-face meeting to sell Bitcoin or by carrying out the transaction online using a dedicated platform.
Online P2P selling
Online peer-to-peer (P2P) Bitcoin sales are facilitated by a number of specialized platforms and products from prominent online BTC exchanges. These platforms effectively enable online transactions between parties wherein one party may exchange crypto for cash and vice versa.
Typically, purchasers of Bitcoin publish their items on these sites, specifying the price they are looking for as well as their chosen method of payment. After identifying postings they like, potential buyers close the deal by following the platform’s instructions.
These platforms usually include escrow services to help assure asset transfer and give both parties a certain level of protection. Depending on the chosen mode of payment, the seller can receive funds through a wire transfer, direct deposit to the seller’s bank account or card, or arrangement to receive money through one of the well-known conventional payment processors.
Face-to-face transactions
Another option is to sell Bitcoin P2P in person. Some websites allow users to sell crypto in person for cash, while others may want to get up with friends or relatives on their own and do the same thing. To sell Bitcoin in person, you must be able to send and receive money using a cryptocurrency wallet or the platform where you keep your money (for example, an exchange).
It’s critical to be aware of the price of the digital currency during an in-person transaction because its value is subject to frequent fluctuations. The majority of traders utilise exchange rates from well-known platforms. In certain regions of the world, there are actual places or outlets where individuals may go and swap the digital currency for FIAT currency, or exchange FIAT currency for crypto.
It is essential to consider that Bitcoin’s value might fluctuate not only across exchanges but also among different geographical locations worldwide. This difference is referred to as a “premium.” A Bitcoin price premium is essentially the difference between the price of an asset trading above or below the rest of the market or, in the case of other trading types like futures, the price of an underlying asset.
It’s crucial to use caution when setting up an in-person cryptocurrency sale with a stranger, whether it’s done through a platform or not. Like with any in-person financial transactions, there are possible hazards involved with dealing Bitcoin with strangers in person.
Trade one crypto for another and then cash out
Certain exchanges refuse to facilitate the swapping or selling of some digital currencies to dollars, which means you’ll need to take a different path to get your cash. You might have to move or convert your digital asset to another well-known currency, such as stablecoin Tether, before exchanging it for USD, depending on the exchange you use.
Bitcoin ATMs
Bitcoin ATMs are not conventional ATMs, despite their appearance being similar to them. To enable Bitcoin transactions, the user is linked to the internet rather than their bank account.
When using a Bitcoin ATM, all you have to do is scan the QR code on your wallet to sell Bitcoin for cash. There are Bitcoin ATMs everywhere in the globe, and you can easily find their locations online. When compared to alternative methods, they often have higher transaction costs. It’s also vital to remember that not all Bitcoin ATMs have the ability to purchase and sell, so keep that in mind while searching for one to sell bitcoins.
Operators of Bitcoin ATMs occasionally demand that customers have an active account in order to execute sales, and the registration procedure can take a significant amount of time, effort, and energy. For instance, in order to get alerts and activate their account, new users might need to supply a phone number, a piece of identification issued by the government, a palm scan, and a recent photo captured by the ATM’s camera. According to the machine and the operator, the identification procedure varies, but if you wish to sell Bitcoin, you will always need to provide some form of identity authentication.
Additionally, BTC ATM owners need to modify the settings on their devices to comply with the KYC and AML regulations that are in effect in the area where their ATMs are located. While existing laws in certain countries prohibit the installation of any Bitcoin ATMs, in others, it requires a money transmitter license.
Following identification verification, you receive a QR code containing the wallet address where your Bitcoins must be sent. Depending on the machine you are using, you will either get cash out of it right away or you will get a redemption code and have to wait for the network confirmation on the Bitcoin blockchain. Usually, you only need one confirmation, but occasionally, you may need up to six confirmations in order to get your money.
Withdrawing Funds: Collecting Fiat
Selling your Bitcoin on a cryptocurrency exchange and withdrawing the proceeds to a bank account by wire transfer or automated clearing house (ACH) transfer is a popular method of converting Bitcoin into fiat money.
Still, this method is far from ideal. Depending on the nation and the amount being sent, transfers might take a long time or even several days. These systems may also come with extra costs.
For instance, certain banks could charge a set price for this kind of payment, and that fee can increase based on how soon you need the transfer to happen. It’s also important to keep in mind that certain financial institutions might view facilitating transactions to and from accounts connected to Bitcoin businesses as illegal.
Thus, if you’re creating a bank account especially to take out profits from selling Bitcoin, you should shop around and pick the bank that best meets your requirements.
What To Consider When Cashing Out
Although converting Bitcoin into cash can appear easy, there are a few things you should consider before withdrawing money from your cryptocurrency wallet.
Taxes
Instances where you convert cryptocurrency into cash, including buying at a Bitcoin ATM, selling on an exchange, trading P2P, or putting funds onto a cryptocurrency debit card, are all scenarios that may be subject to taxes. For further information on how cryptocurrency transactions are taxed in your region, you should consult a tax expert.
Transaction fees
When converting your Bitcoin to cash, there will be expenses involved, also called gas fees. Considering the size of the transaction could influence which approach you need to use.
Speed
Every technique requires a different amount of time and work. For instance, selling on a centralized exchange or utilizing crypto cards requires far less time and effort than selling on a crypto P2P exchange or looking for a Bitcoin ATM.
Market health and long-term goals
While some cryptocurrency enthusiasts want to keep investing for the long term, others could decide to cash out as soon as they start making money. Determine which camp you belong to and if selling your cryptocurrency for cash is the best financial move for you right now.
Conclusion
There are several options for traders to sell their cryptocurrencies. Well-known and dependable cryptocurrency exchanges are always a safe choice, and peer-to-peer online marketplaces could provide greater payment flexibility. You can take the easy path and utilize a Bitcoin ATM to have quick access to your digital currency, but the commission will be substantially greater.
However, it’s crucial to realize that selling your crypto may result in a tax burden, so you should make sure taxes are taken into consideration before selling.
