How to Turn Bitcoin into CashPosted by Frank GogolUpdated on June 16, 2022
Demand for Bitcoin has increased dramatically. If you’ve owned Bitcoin for a while now you may be able to make a profit if you ‘sell’ your Bitcoin and transfer the equal value to your bank account. Or you may need to convert your Bitcoin to cash to be able to buy actual things. Whatever you need it for, you’re probably wondering how to turn Bitcoin into cash.
Here we look at the different options for how to turn Bitcoin into cash in a few simple steps.
What is Bitcoin?
Bitcoin is a digital currency, also known as a cryptocurrency. There is no physical bitcoin, merely digital data stored in blockchain. This means it is a secure form of currency that is devoid of government control.
Bitcoin has a stipulation, set forth in its source code, that there will only ever be 21 million bitcoins produced. This limited supply is also what gives bitcoins their value. As the demand for bitcoin increases, you can exchange a single bitcoin for more money or services. In this way, bitcoin has become a traded store-of-value commodity, like gold.
Why Transfer Bitcoin To Your Bank Account?
The ultimate idea is that bitcoin will replace traditional currencies. People are currently investing in bitcoin because they view it as a commodity that will grow in value over time. If you have bitcoin, you may want to hold on to it for that reason. But, since demand has increased recently, you may be able to make a profit if you ‘sell’ your bitcoin now and transfer the equal value to your bank account.
In theory, you will one day be able to use bitcoin for any type of sale. For now, there are still few businesses or individuals that accept payment in bitcoin. That is one reason you may want to convert your bitcoin to cash — to use the value of your bitcoin to buy actual things.
How to Move Bitcoin To A Bank Account?
Moving bitcoin to a bank account is the same kind of process as converting currencies at the airport when you arrive in a new county. You are essentially ‘selling’ your bitcoin and ‘buying’ the equal value in dollars (or the currency of your choice).
The ‘exchange rate’ for this currency exchange is not determined by the economic actions of a government or a country’s central bank. Instead, the bitcoin exchange rate is determined by demand. How many people want to buy bitcoin right now and what they are willing to offer will determine how much money you will get for your bitcoin.
Moving bitcoin to a bank account is like exchanging currency. But because bitcoin is devoid of government control, the exchange process occurs privately. It is not mediated by world economic structures.
There are two main avenues to convert bitcoin to cash and ultimately move it to a bank account. Firstly, you can use a third-party exchange broker. These third parties (which include bitcoin ATMs and debit cards) will exchange your bitcoins for cash at a given rate. It is simple and secure. Or, you use a peer-to-peer transaction to sell your bitcoin. This is a faster and more anonymous method, as you sell your bitcoin directly to another person.
Third-Party Broker Exchanges
A third-party broker is another name for a cryptocurrency exchange. The process is the same as currency exchanges in the airport of a foreign country. You deposit your bitcoin into the exchange. Once the exchange has received your bitcoin, you can request a withdrawal in the currency of your choice. The withdrawal will be paid into your bank account.
Brokers are restricted by money laundering laws, so you will need to withdraw to the same bank account that you deposited with.
It’s simple, easy, and secure, but it’s not the fastest method. The average time for money to reach your account is about 4-6 days but it varies by country. Any associated fees also depend on the country that your bank is located in.
Bitcoin ATMs and Bitcoin Debit Cards function in the same way as third-party brokers. In both cases, you create an account that allows you to sell bitcoins and withdraw physical cash. The biggest drawbacks are the high transaction fees.
Coinbase and Kraken are the most popular broker exchanges for buying and selling bitcoin.
How to Cash out Bitcoin Using a Broker Exchange
Using a broker exchange for your Bitcoin is also quite simple if you follow these easy steps:
- Decide which third-party broker exchange you want to use. Cashing out with Coinbase or Kraken are popular options.
- Sign up and complete the brokerage’s verification process.
- Deposit (or buy) bitcoin into your account.
- Cash out your bitcoin by depositing it into your bank account or PayPal account (applicable to some services).
Keep in mind the withdrawal times may be 4-6 days. Transaction fees may also apply.
For a quicker, more anonymous method, you can use a peer-to-peer platform to sell bitcoin for cash. When selling bitcoins to other people, you can decide which payment method you want the buyers to use. This often allows for faster transactions with fewer fees. You can also often get a better exchange rate with an individual buyer than you can with a third-party brokerage.
You can ask the buyer to deposit cash into your bank account or to send you a bank transfer payment (you can even use PayPal). Always ask for proof of ID and proof of payment before releasing your Bitcoins to them.
Peer-to-peer selling is safe if you know what you’re doing. However, it’s important to be aware of fraudsters. It may be useful to use a peer-to-peer platform that allows you to keep your bitcoins locked until you confirm the payment has been received from the buyer.
The most popular peer-to-peer platform is LocalBitcoins.
Turn Bitcoin into Cash Using a Peer-to-Peer Exchange
Here are a few simple steps for how to cash out Bitcoin using peer-to-peer exchange:
- Decide which peer-to-peer exchange platform you want to use. LocalBitcoins is a popular option.
- Sign up and choose the location of your ideal buyer.
- Use the marketplace to find buyers, and send a trade request.
- Most peer-to-peer platforms have an escrow option where your bitcoins are not released to the buyer until you have confirmed you’ve received payment.
Many peer-to-peer platforms allow you to create an advertisement for your bitcoin (although there are added fees associated with this method). There is also a rating system like eBay, where you can leave feedback for the buyer or seller. This helps you remain safe when choosing a buyer.
Peer-to-peer platforms also allow you to stay anonymous. You can use a VPN to secure your connection and choose payment methods such as web money or gift vouchers.
Considerations When Cashing Out Bitcoin
Before you convert all your bitcoin to cash, consider the following pitfalls:
- Taxes – If you are making a profit on selling your bitcoin, you will have to pay taxes on your profit income. Keep this in mind while planning your tax year. Any reputable third-party broker exchanges will report their transactions for tax purposes.
- Fees – Most bitcoin-to-bank-account methods will entail exchange fees.
- Speed – Third-party broker exchanges may take a couple of days to transfer the money into your bank account.
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