How To Cash Out Your Bitcoin

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How To Cash Out Your Bitcoin


Since 2009, when it was invented, Bitcoin has grown a lot faster than most folks thought it would. Now it’s one of the world’s most popular cryptocurrencies!

While some people like to hold (or hodl) on to their Bitcoin, there’s likely going to come a time when you’d like to cash out (hey, I don’t blame you, that’s how some people have become millionaires).

Buying and selling Bitcoin isn’t quite the same as exchanging your dollars for Yen or Euros before traveling abroad, but converting this cryptocurrency isn’t as difficult as you might imagine, either.

I’ll walk you through how to convert your bitcoins into cash through an online cryptocurrency exchange and other methods, as well as when and why you should consider selling.

How to sell and cash out your bitcoins

How To Cash Out Your Bitcoin And What You Should Know Before You Do - How to sell and cash out your bitcoins

Let’s dive right into how you can sell and cash out your bitcoins. But first, you need to explore the “why” behind selling and cashing out.

Determine why you want to receive profits from Bitcoin

As a virtual asset, Bitcoin isn’t money in the traditional sense. You could “cash out” your bitcoin, so to speak, by shopping online through a service such as Moon or Lolli, which accepts Bitcoin as currency. That’s a lot like spending a massive gift card at your favorite retailer.

However, if you want to get cash in hand—or your bank account—you’ll need to convert your bitcoins into fiat currencies, or government-issued currency, such as the U.S. dollar. 

Unlike cash based on commodities, fiat money is backed entirely by the complete faith and trust in the authorities that issued it. In some nations, such as the United States, fiat currency also is the legal tender. (Fun fact: the word fiat stems from Latin and often translates to “let it be done” or “it shall be”).

Before I outline how to do that, though, think about why you want to sell and cash out your bitcoins. Depending on your needs, one method might be more convenient than another—and save you on taxes and fees.

  • Do you need cash to pay bills, or are you going to splurge with some fat stacks? A cryptocurrency exchange is a secure and relatively easy option, especially for people new to this process. However, you will need to pay income tax on these earnings.
  • Is this an emergency? If you need a few thousand in a hurry, Bitcoin ATMs might be the better option, although these charge hefty transaction fees.
  • Do you want to get the highest price for your bitcoins that you possibly can? A peer-to-peer Bitcoin exchange allows you to deal directly with buyers, so you don’t lose any transaction fees to an intermediary. It also offers escrow service as added protection and the ability to choose your payment methods, such as a cash deposit, gift voucher, bank transfer, or even a PayPal account.
  • Do you travel frequently? You might want to load up Bitcoin debit cards, which allow you to purchase items much like regular debit cards. They even enable you to withdraw cash at ATMs anywhere worldwide that accept Visa or MasterCard. Consider these an automatic currency exchange in your wallet while you’re abroad.

Let’s examine how to sell and cash out Bitcoin through each of these methods.

Option 1: use a cryptocurrency exchange

If you want to flat-out convert your bitcoins into your local fiat currency, an online crypto exchange is the way to go. A cryptocurrency exchange is a secure third party that provides a way for you to sell and cash out your bitcoin for fiat money such as U.S. dollars, Japanese yen, Malaysian ringgit, Pound sterling, or Euros. 

Locate an exchange that supports traders from your country

An exchange such as Coinbase or Robinhood supports traders from all over the world. Others are more specialized, serving only one or two countries or having exceptions to the countries, states, or territories they serve. Here’s a brief overview of several crypto exchanges:

  • Bitbns. Founded in 2017, Bitbns serves India.
  • CEX.IO Broker. Serves more than 170 countries, including Argentina, Australia, the Bahamas, Barbados, Costa Rica, Ecuador, Egypt, Haiti, Hong Kong, Mexico, Monaco, Peru, Republic of Korea, the Russian Federation, Saudi Arabia, Singapore, South Africa, Sri Lanka, Thailand, Turkey, the Ukraine, and United Arab Emirates.
  • Coinbase. Serves more than 100 countries, including the United States, the United Kingdom, Austria, Belgium, Canada, Colombia, Costa Rica, the Dominican Republic, France, Greece, Hong Kong, India, Indonesia, Ireland, Italy, Kenya, the Philippines, Poland, Portugal, Mexico, the Republic of Korea, Singapore, South Africa, and Switzerland.
  • Coinmama. Serves more than 180 countries, except for some U.S. states and territories, as well as countries including Lebanon, North Korea, Sudan, Syria, and Somalia. 
  • Independent Reserve. Founded in 2013, Independent Reserve serves Australia and New Zealand.
  • Luno. Formerly known as BitX but rebranded in 2017, Luno serves more than 40 countries, including the U.S., the U.K., the Czech Republic, Denmark, Finland, France, Greece, Iceland, India, Indonesia, Lithuania, Monaco, the Netherlands, Romania, Singapore, Slovakia, Spain, Sweden, and Switzerland.
  • MaiCoin. Founded in 2014, MaiCoin serves Taiwan.
  • OKCoin. Serves more than 190 countries with offices in Hong Kong, Japan, Korea, Malta, San Francisco, and Singapore.

Set up an account

You’ll need to set up an account to trade and cash in Bitcoin. While the process might vary depending on the crypto exchange, these services tend to have specific requirements in common, such as proof that you’re at least 18 years old (through a government-issued photo I.D.). 

Robinhood, for instance, requires account holders to be 18 or older, be legal U.S. citizens, permanent residents, or have valid U.S. visas; and have a valid Social Security Number. 

Some crypto exchanges don’t charge a fee for setting up an account. Let’s use Coinbase as an example here:

  1. Visit the Coinbase website or the app on Android or iOS on your computer (not a mobile device). Click or tap “Get Started.”
  2. Enter your full legal name, email address, the state where you live, and a password.
  3. Read and agree to the User Agreement and Privacy Policy.
  4. Click “Create account” or tap “Sign Up,” then verify your email address.
  5. Sign in to your verified account and add a phone number, which the crypto exchange will verify by texting you a code.
  6. Fill in personal information, including your date of birth, complete address, occupation, employer, source of funds, and the last four digits of your Social Security Number. 
  7. Follow additional instructions sent privately to verify your identity through a two-step verification process (to avoid unauthorized account access). You’ll need to provide a copy of your government-issued I.D., such as a driver’s license or passport (not a passport card).
  8. Establish a payment option, such as a bank account.

Share your cryptocurrency address to fill your wallet with Bitcoin

Where do you currently keep your bitcoins? Once you’ve established and verified your new crypto exchange account, you’ll want to deposit your bitcoins into the crypto exchange’s wallet. Again, this varies by exchange, but you’ll check the exchange’s dashboard or open the trading view in general.

Look for an option such as “Wallet Balance” and select “Deposit” and “Currency Type.” You’ll need to open the external wallet where you hold your Bitcoin, enter its unique address, enter the amount you want to withdraw, and then hit “Send.”

Cash out your bitcoins from your crypto wallet

At this point, you can buy other cryptocurrencies on whatever platform you chose or withdraw funds to your particular payment method, such as a bank account. Look for a “Buy/Sell” option on your dashboard, select “Sell,” and enter the cryptocurrency and amount you want to withdraw.

Crypto exchanges often place a short hold on the withdrawal (usually five days) before releasing the bitcoin and transferring the money to your bank account. Like an online brokerage, they also might charge specific fees. Coinbase, for instance, charges a flat fee of 0.50% for all conversions. 

Robinhood does not charge a commission, but the site notes that it charges customers fees from self-regulatory organizations such as the Financial Industry Regulatory Authority, which cover securities regulation costs.

Once you have your net proceeds in your bank account, be sure to set aside what income tax you’ll owe. Check how the crypto exchange sends you any tax documents, such as posting them for download securely from your account. 

Option 2: use Bitcoin ATMs

Although an online crypto exchange is a secure and convenient option for many users, sometimes you don’t want to go through the process of signing up, verifying your identity, and then waiting for the withdrawal to clear. 

If you’re faced with an emergency, you can visit a Bitcoin ATM and take out a small amount. Most of these machines have withdrawal and deposit limits of $1,000 to $10,000, so you won’t be able to convert every bit of bitcoin you own. Plus, who wants to carry around large stacks of cash?

Find a Bitcoin ATM near you

As of this writing, there are roughly 18,000 crypto ATMs across approximately 70 countries, according to Coin ATM Radar. For instance, about 15,000 exist in the United States, 1,300 in Canada, and 200 in the United Kingdom.

About 40% of all installed Bitcoin ATMs support selling. Find one near you using the interactive map from the Coin ATM Radar homepage: 

  • Select your cryptocurrencies, such as Bitcoin (BTC) or Bitcoin cash (BCH).
  • Select whether you want to buy or sell.
  • Scroll along the map to find your area. For instance, about 89 ATMs sell Bitcoin in the New Jersey/New York area. 
  • Zoom in on the map to find one closest to your location.

Verify your identity

In general, the operator of the crypto ATM will require that you verify your identity. The procedure varies by type of machine, though.

Select your options

Depending on the machine’s interface, you’ll likely need to choose “withdraw” or “withdraw cash.” Then select “Bitcoin” if the machine supports other cryptocurrencies.

Enter the amount you want to withdraw

Once you enter how much you want to withdraw, the machine will display a QR code. Capture this on your smartphone to send bitcoins to the ATM.

Take your cash — minus a fee

Voila! Once the ATM records the transaction, you’ll receive cash. You’ll also have to pay a fee for this convenience. Unlike an online cryptocurrency exchange, which might charge from 0.1% to 1% per conversion, Bitcoin ATMs charge a rate that’s about 7% to 12%. Depending on how much you withdraw, that could be a significant bite—but if you need the amount the ATM allows right away, it might be worth it.

Option 3: use a peer-to-peer Bitcoin exchange

A P2P or peer-to-peer Bitcoin exchange puts you directly in contact with potential buyers for your Bitcoin so that you can exchange them for your local currency. No third party facilitates the transaction, although some of these exchanges act as an escrow service and mediate transactions to help prevent fraud.

Find a Bitcoin exchange that serves your country

LocalBitcoins, founded in 2012, supports a variety of secure payment methods across more than 240 countries. However, due to regulatory or international financial restrictions, it does not serve traders from the United States, Indonesia, North Korea, China, or Syria. (It does trade in U.S. dollars, though, as well as other fiat currencies).

U.S. traders might want to try BitQuick, a peer-to-peer exchange affiliated with Athena Bitcoin, which operates crypto ATMs throughout North and South America. The company has offices in Chicago, Dallas, Saint Louis, Miami, Buenos Aires, and Bogotá. BitQuick also provides an escrow address with your account.

Set up an account

Setting up an account at LocalBitcoins is free, although you will need to verify your identity. LocalBitcoins employs a remote onboarding process that applies facial recognition to match each user with their image from an official government I.D. 

LocalBitcoins has four different trading tiers with additional security verification, but it’s possible to open a secure account within 20 minutes. Each tier requires a user’s:

  • Full name.
  • Country of residence.
  • Email address.
  • Phone number.

At the basic level, it might require you to submit a selfie to match your photo on your government I.D. Higher tiers require: 

  • KYC (or “Know Your Customer”) verification.
  • A physical address check.
  • Proof of residency.
  • Extra verification, such as a selfie video.

Selling Bitcoin on BitQuick also is free and involves supplying:

  • An email address.
  • How much Bitcoin you’re selling.
  • How to set the price of your order (static or dynamic).
  • How you want to be paid: (a) a cash deposit to your bank account or credit union, or (b) picking up cash with MoneyGram or Western Union.

The site also provides secure authentication so that you can modify your order.

Find a Bitcoin buyer from the marketplace

Your P2P Bitcoin exchange account grants you access to a secure online wallet where you can transfer your Bitcoin for sale. This process varies by exchange, but once you’ve transferred your bitcoins, search the marketplace for buyers. 

For instance, on LocalBitcoins, you’d select “Quick Sell,” filter by country, and choose your preferred payment mode. Within moments, you’ll receive a list of relevant buyers that you can choose by reputation score and amount of completed trades.

Set up the transaction

Enter the amount of bitcoin you want to sell and your payment details, such as your PayPal email address or another method, such as Zelle. Once the buyer accepts your offer, you’ll send your bitcoins to the exchange’s escrow account for holding.

Get paid for your Bitcoin

Once the exchange records that you’ve received your Bitcoin payment, it will release the bitcoins to the buyer. If the buyer doesn’t mark the payment complete within a certain amount of time (I’d say about three hours), the exchange automatically cancels the trade.

Option 4: use Bitcoin debit cards

If you travel frequently, you might find a Bitcoin debit card a convenient way to spend your Bitcoin like local currency without conversion fees. 

Bitcoin debit cards don’t convert Bitcoin into cash, per se. They’re more like a bridge between the world of cryptocurrency and the real world. Consider them prepaid cards that you can load with bitcoins and use for purchases as you would a regular debit card linked to your bank account.

A reputable Bitcoin debit card works as a form of payment anywhere that accepts MasterCard or Visa, even if that merchant doesn’t accept Bitcoin. The card automatically converts it into local fiat money.

What’s more, depending on a card’s features and services, you might be able to withdraw cash from any ATM that supports Visa or MasterCard—never mind locating a Bitcoin ATM.

Find a card with features that you like

Bitcoin debit cards have perks similar to consumer debit cards and credit cards that offer cash-back bonuses, discounts, and low annual percentage rates. You’ll find that it pays to shop around. Here are a couple of well-known Bitcoin debit cards:

  • Crypto.com. Crypto.com offers cardholders Visa debit cards with no annual fees that you can top up with cryptocurrency or fiat money. You can earn CRO Rewards (similar to a cash-back bonus but in Bitcoin) of 1% to 8%, depending on the amount you’ve spent in your secure wallet app over six months. These cards also offer full or partial reimbursements on subscriptions to Netflix, Amazon Prime, and Spotify, as well as purchases through Expedia and Airbnb. 
  • Wirex Visa. Wirex supports more than 150 forms of currency so that you can make purchases internationally without exchange fees or other charges. It also offers free instant fiat-to-fiat exchanges, free ATM withdrawals (except for Singapore) and earns up to 2% back in crypto on all in-store purchases.

Meet the application requirements

These vary by card, but in general, a card company will require you to stake your cryptocurrency for a holding period before granting access, similar to verifying your identity when you open an account with a crypto exchange.

For instance, for the Crypto.com Visa Card, you’ll sign up for an account and complete the company’s KYC verification process. Purchase a stake of CRO tokens with your Bitcoin, and deposit them into your Crypto Wallet. 

The company has different tiers of CRO staking that correlate to various benefits, from $400,000 to $0. Crypto.com requires that you stake your CRO tokens for 180 days before granting you a Visa card.

Top up your card as needed

Depending on the crypto debit card, you can top up your card in several ways, such as through cryptocurrency accounts, bank account transfers, or other credit and debit cards. 

For example, Crypto.com allows you to use a Fiat Wallet, credit or debit card, or your Crypto Wallet whenever you need to stake more tokens to reload the card.

Why you should sell and cash out Bitcoin

How To Cash Out Your Bitcoin And What You Should Know Before You Do - Why you should sell and cash out Bitcoin

Are you still weighing the pros and cons of each of these conversion methods? Maybe it’s time to consider why you should sell your bitcoins in the first place. 

The saying “buy low, sell high” holds true for Bitcoin as it does for any other investment. But Bitcoin has had such ups and downs since it first appeared that it’s tough to determine when you’ll get the most for your money. 

Consider this: in December 2013, BTC was trading at about $1,156—and then fell to about $760. Even though the COVID-19 pandemic shut down much of the economy, cryptocurrency rebounded, with Bitcoin reaching just under $24,000 in December 2020 and just over $41,000 in January 2021. That same month, it fell to just over $30,000—quite a drop, but an astronomical increase compared to 2010 when it was worth just $0.0008. 

Questions to ask yourself to determine if you’re ready to sell

You might ask yourself the following questions to determine if you’re prepared to sell your bitcoins. 

Have I achieved my investment goals?

If you purchased Bitcoin for less than pennies on the dollar years ago, you’ve more than recovered your initial investment. What was your goal when buying Bitcoin? If you’ve wanted to earn enough for a down payment on a home or to pay off your mortgage, student loans, or high-interest credit card debt, you might well have hit that mark by now – as good a time as any to sell. 

Are my assets giving me anxiety?

Just a nutshell of Bitcoin’s trading history feels like a rollercoaster. If you’re tired of this wild ride and not knowing what your assets are worth from day to day, it might be time to get off. Cash out your bitcoins so you can enjoy the proceeds or roll them over into another market where you’re not losing as much sleep at night.

Is all my money in Bitcoin?

After more than ten years on the market, Bitcoin has proven to be a risky investment. You might have the stomach and the stamina to ride this one out, but for a healthy financial future, it’s wise not to put all your chips in the same place. Take a page from the good-old 401(k) and diversify.

Is another investment calling to me?

Do you have an entrepreneurial spirit? If there’s a startup or other investment out there with a mission that you support, you might consider using part of that Bitcoin wealth to pay it forward. Get in on the ground floor as an investor and help someone else’s dream grow.

Do I just need the money?

Forgive me for leaving the obvious question until last. Sometimes as much as you’d like to let your investments ride, you need to tap into them sooner than later. Medical bills, a job layoff — any number of things can crop up that require an influx of cash instead of digging deeper into debt. If that’s what you’re facing, ease up on the guilt, be thankful for this safety net, and know that you don’t have to cash in all of it.

Why you should wait to sell

How To Cash Out Your Bitcoin And What You Should Know Before You Do - Why you should wait to sell 

Of course, another side of the coin is: why hold on to that Bitcoin for a while longer? Maybe you’ve been a HODLer (someone who buys and holds Bitcoin, an acronym for “hold on for dear life”) for a long time, and none of the ways I’ve described for cashing out Bitcoin appeal to you. 

Here are a few other questions to consider before selling your bitcoins.

Do I like the novelty of owning Bitcoin?

As an asset class, Bitcoin is a new kid on the block. Each time a speculative bubble occurs, funding drives the evolution of this technology and financial infrastructure. If you’re comfortable with risk and got in on the ground floor — or during one of Bitcoin’s previous ebbs in the market — you might appreciate watching this cryptocurrency evolve, knowing that you’re part of its community.

Am I concerned or excited about the scarcity of Bitcoin?

The dance of supply and demand drives pricing for any investment. The total amount of bitcoins that can ever exist is 21 million.

You might not want to sell your bitcoins just yet because you’re concerned about the possibility of not being able to repurchase it. Then again, perhaps you’re like many HODLers who get a thrill out of its decentralized digital scarcity. 

It’s like having the key to an exclusive club, such as Club 33 at the Walt Disney World parks that has a waiting list of more than a decade to enter and costs thousands a year in membership fees.

Do I think I could make more money?

As more people experiment with cryptocurrency, more businesses accept Bitcoin, driving the demand. Even though its trading history has been volatile, Bitcoin value will likely continue to appreciate over the next decade. 

One bitcoin might be worth about $397,000 by 2030, according to a Crypto Research Report. Another estimate from Lightspeed Venture Partners places it at $500,000 per coin that year. Either way, that’s a lot more money than it’s worth at this writing.

Summary

Whether you believe Bitcoin is the currency of the future or you’re wondering when it’ll crash, you owe it to yourself to explore the available options for converting your bitcoin into cash. Consider which ones meet your needs as far as urgency, fees, and access so you can make the most out of your purchase of digital assets.

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