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Selling Bitcoin for Cash
Swen Keller
In the crypto world Swen has consistently found success through his effective communication skills and the unique ability to navigate the details.
Did you know Bitcoin’s daily trading volume has averaged around 17-18 Billion USD? To put things into perspective, roughly, that’s how much money the New York Stock Exchange handles every day (The largest stock exchange in the world by market capital). To cater to such tremendous demands, users have come up with numerous ways to cash out on their Bitcoin investments.
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Most regular Bitcoin wallet users prefer to cash out their holdings the traditional way: over a reputable and well-established crypto exchange like Coinbase or Kraken. While others choose to do so with the help of brokers. However, with increasing demands and adoption of Bitcoin, novel ways are popping up, providing users with better conditions to liquidate their crypto assets. Examples include peer-to-peer marketplace, Bitcoin ATMs, and debit cards.
This blog will serve as a quick and easy guidebook for the most popular and profitable ways with which you can convert your Bitcoin into fiat currency, with a quick analysis of each method.
How to sell Bitcoin: 5 ways to ‘cash out' your BTC holdings
Here are five different ways to convert your Bitcoin to fiat currency, each having a unique benefit.
1. Selling Bitcoin on a cryptocurrency exchange
Exchanges are the central hub for trading in any market, and Bitcoin is no different. Cryptocurrency exchanges serve as a gateway between fiat currencies and cryptocurrency, allowing users to convert one form into the other in a single click. Some popular exchanges include Kraken, Coinbase, and Binance.
Owing to a high user base, market makers, and incentives, a busy cryptocurrency exchange usually has high liquidity, meaning you wouldn’t have to wait at all to sell Bitcoin for whatever currency you want.
Steps
Sign Up / Login on to the platform’s website.
Connect your wallet or payment method.
Navigate to the “sell” or “trade” icon.
Choose the type of order (market or limit). If using a limit order, set your desired price.
Confirm and execute your transaction.
Monitor and wait for the order to be fulfilled. Once complete, your account will be credited with the money which you can deposit in your bank account.
Pros
Instant trading Bitcoin (no waiting)
Accepts a wide variety of payment methods (cards, wallets, bank transfers)
Offers a wide range of currencies besides USD, GBP, and EUR (so you don’t have to worry about additional exchange rates)
High-security measures safeguard your data and information
Cons
May have to pay high transaction fees
Additional platform fees may be applicable
Withdrawal limits (Can be overcome by subscribing to membership programs)
Most are centralized exchanges, meaning you can not operate anonymously
Note: After our exhaustive hands-on investigation, we have concluded that complete anonymity is very hard to achieve, and would require both, a decentralized exchange as well as a decentralized crypto wallet.
Learn more about popular crypto exchanges to sell Bitcoin here.
2. Selling Bitcoin at a Bitcoin ATM
Bitcoin ATMs convert Bitcoin to fiat currencies and vice versa. Unlike a traditional ATM, these can also convert your cash into digital currency (Bitcoin), allowing you to directly withdraw cash. They are licensed by the government, meaning they are highly regulated, offering little to no anonymity (KYC and AML rules apply). They’re very simple to use and are pretty straightforward, here’s how a typical transaction proceeds.
Steps
Locate nearby Bitcoin ATMs using an ATM locator.
Depending on the ATM, you may have to provide identity verification. (most small transactions don’t require any though)
Scan your wallet’s QR Code or enter your wallet address.
Choose how much funds you wish to withdraw and confirm the transaction.
Once the transaction is processed, you’ll receive cash along with a receipt.
Pros
High Speed. Transactions take only a few minutes.
Easy to use; as their interface is designed like a traditional ATM. Most users are familiar with it.
No bank account required (or intermediaries)
Operate 24/7
Cons
They charge high transaction fees when compared to other methods.
Scarcity of ATMs means not a reliable way to take out cash. (83% of all ATMs are located in North America)
Risk of scams just like with traditional ATMs.
Transaction limits on withdrawing funds (varies with each ATM, typically rounds up at 10-15 Grands)
3. Online P2P selling Bitcoins for cash (peer-to-peer basis)
Of all the methods in this guide, Online P2P selling might be the most discreet way of selling Bitcoin. Services like BitQuick and BitcoinOtc allow users to meet other people looking to trade Bitcoin or other cryptocurrencies with them. Unlike other methods listed here, you’ll have to do the hard work of finding the right person to trade with yourself. This also means you can be a target of scams/thefts.
Steps
Sign Up on a reputable platform like Paxful or Bitquick.
Depending on the platform, you may need to create a new wallet if your current one is not compatible.
Once connected, your Bitcoin holdings can be listed for sale. Specify how much bitcoin you want to sell, and how much USD (or other currency) you are accepting for it.
Once you open a position, potential traders will communicate with you, and you can negotiate a deal.
After agreeing upon the terms, you can initiate the trade. The transaction can take many forms, varying from one platform to another. (Eg using an escrow account)
Verify that the funds have been received in your bank account and you can release the bitcoin from the escrow account (temporarily stores bitcoin to safeguard transactions)
Pros
Very low fees
Access to a wide market with highly flexible and potentially lucrative trade offers
Accepts a diverse range of different payment methods
Escrow services act as a safety net for your transactions
Highly anonymous trading; worldwide access.
Cons
Very high risks of scams
Low Liquidity and speed. Finding transactions can take a long time because there are no brokers or market makers.
Such platforms are usually decentralized, so there is no guarantee your information is safe or not.
4. Cryptocurrency Debit Card
If you don’t directly require hard cash and instead wish to make an online transaction, then a crypto debit card might just be what you’re looking for. A crypto debit card is connected to the user’s crypto wallet and can be used to make payments to vendors or merchants that accept traditional credit or debit cards. It can be both physical or virtual, offered by a third party, and is relatively simple to use.
Steps
Register on reputable platforms that offer crypto debit card services. Options include a Coinbase Card or Wirex Card.
After registering, you’ll need to add your preferred payment method, wallet address, and other personal information to request a debit card.
Load Bitcoin into your card. Depending on the platform, this may actively convert your Bitcoin into a regular currency, based on the platform’s exchange rate. (Note: If your card stores it in Bitcoin, it will likely convert it at the time of the transaction)
Spending at the merchant’s website requires the same steps as when using a traditional bank card.
You can also use this card at any ATM to withdraw funds.
Pros
Widespread acceptance, providing users with a convenient method to spend their Bitcoin holdings
Doesn’t require you to convert your Bitcoin before the transaction, and converts it in real-time
Global accessibility enables more diverse usage
Well-established crypto cards are integrated with known networks like Visa or Mastercard.
Cons
Increased costs, including issuance fees, transaction fees, and currency conversion fees.
Faces security concerns just like traditional credit or debit cards. Users should be cautious about their card details.
Exchange rate fluctuations mean you may suffer hefty losses during times of market volatility.
Thoroughly applies KYC(Know-your-customer) and AML(Anti-money-laundering) protocols, significantly reducing anonymity.
Learn more about different crypto cards and their benefits here.
5. Over-The-Counter Trading
Trading outside the regular order books, and instead hiring agents or agencies that carry out the transactions for you. It is the most popular method of cashing out large sums of Bitcoins, without risking your identity. Popular brokers that offer these services are Coinbase Prime, Kraken OTC Exchange, and Genesis. Essentially, it is the advanced, more sophisticated version of P2P trading discussed above.
Note: You don’t necessarily require an intermediary for OTC trading. It depends on whether you can secure an interested party or not.
Steps
Identify potential counterparties that might be interested in trading with you. You can scout for them on OTC desks, personal networks, or other platforms.
Post your requirements to the opposite party/person, specifying what you want from the trade. This includes how much Bitcoin you wish to sell, what the exchange rate you’d like, and what your preferred currency and payment method is.
Depending on who you’re trading with, several rounds of negotiations might be needed before you and the other party settle on an agreement. Once confirmed, the transaction can proceed.
Some people may involve a third-party broker to increase the transparency and security of the transactions.
Pros
Highly private and discreet, minimizing the risk of exposing sensitive trading details to the public.
Trade on your terms. Since you’re not bound by any regulations or restrictions by a platform, you can choose the terms of the deal freely.
Beneficial for large trades, providing immediate liquidity without significantly impacting the network as well as no additional trading fee.
Since trades happen privately, you can avoid market fluctuations.
Cons
Since no intermediary is involved, counterparty risk is present.
This system of trading is unregulated, so no guarantees or safeguards are available.
Check out this blog for more details about OTC Trading and OTC platforms.
Difference Between Cashing Out Small and Big Amounts of Bitcoin
Cashing out Bitcoin, whether little or a lot, essentially follows the same process, but the experiences can vary greatly. While handling small amounts is typically not that complicated, trading Bitcoin becomes more complicated as trade volume increases.
Drawing from our hands-on evaluations, we can state that with smaller Bitcoin transactions, it’s best to operate on a crypto exchange as the transaction fees are minimal and there are virtually little to no risks involved. However, when things start to get big, several factors come into play. Let’s take a look at them one by one.
Market Impact
Selling large sums of bitcoin isn’t as simple as it sounds, you need enough market liquidity for your transaction to proceed, and this can take quite some time. The process is slow and can potentially fluctuate the price of the asset in a phenomenon called “slippage”, meaning sudden price drops may reduce the expected price you were hoping for.
Higher Scrutiny
Moreover, larger transactions often attract more attention from regulatory authorities. Since most exchanges are under governmental supervision, you’ll need to be prepared for extra scrutiny and comply with any anti-money laundering (AML) and know-your-customer (KYC) regulations.
Transaction Costs
On many exchanges, transaction costs follow a steep curve, meaning you might need to pay a lot more for cashing out large amounts of Bitcoin (relatively speaking). This can significantly cut down on profits.
So what’s the solution then? Through our team’s direct experience and analysis, we have determined that Over-the-counter trading offers the best solution for investors looking to cash out big amounts of bitcoins.
Final Word: What's The Best Way Of Selling Bitcoin For Cash?
From crypto exchanges to Bitcoin ATMs, and P2P platforms to crypto debit cards, there’s a whole universe of options to explore. Remember, each method comes with its unique set of pros and cons, and after our direct and extensive analysis, we have noted that:
Speed or payment in diverse currencies: Online exchanges like Kraken or Coinbase.
Cash on the go: Bitcoin ATMs.
Lower transaction costs: P2P platforms.
Convenience: Cryptocurrency debit card.
Large Transactions: OTC trading.
FAQ
Most frequent questions and answers
The minimum amount of Bitcoin you can cash out varies by platform. For example, on Coinbase, the minimum is $0.10 (depending upon the exchange rate).
The cost to sell Bitcoin varies by platform, but most exchanges charge withdrawal fees between 0.5% and 1.5% per trade.
Banks do not directly exchange Bitcoin for cash. However, online platforms, like Coinbase, Binance, and Kraken allow you to convert your Bitcoin into cash and transfer it to your bank accounts.
The cheapest way to sell Bitcoin for cash is through platforms like Binance as they have lower fees.
The speed to convert Bitcoin to cash can be instant on platforms like Kraken or Coinbase, but it may take a couple of days for the funds to transfer from your digital wallet to your bank account.
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