Cryptocurrency is a blockchain digital currency that is fast emerging as a smart investment option. The only concern among investors is that it cannot be used for daily transactions like paying provisions bills. So the question arises as to whether it is possible to convert сryptocurrency to cash.
The good news is that doing this is extremely easy. However, you might consider a few factors.
Disclaimer: in this text we talk about all the cryptocurrencies calling them bitcoins. When it comes to Bitcoin as a technology, we use capital B.
Why move cryptocurrency to your bank account?
The main reason many youths are investing in cryptocurrency, especially Bitcoin, is the idea that it will eventually replace government-issued currencies. In essence, bitcoin will one day be used for any purchase type when it replaces the traditional currencies like USD, EUR, and more. Nonetheless, there are currently limited individuals or businesses that accept payment via cryptocurrency.
This demands converting your bitcoins to cash to be able to purchase actual products and services. Another reason will be if you suspect that the value of the Bitcoin will fall. You will want to convert сryptocurrency to cash to avoid making losses.
How to move cryptocurrency to your bank account
Transferring bitcoin to your bank account is similar to exchanging currencies. You are selling your bitcoins and buying the equal value in your preferred currency. Since they are not under government control, the exchange process is private.
The exchange rate of traditional currencies is determined by a country's central bank or the government's economic actions. However, the Bitcoin exchange rate is determined by demand. The amount of money you will receive from your crypto will entirely depend on how many people want to buy bitcoins and their offer.
Cash out methods to move crypto to your bank account
There are two main ways to convert cryptocurrency to cash and transfer it to your bank account. These are third-party broker exchanges and peer-to-peer platforms. Let us dig deeper into how each method works.
Third-party broker exchanges
Converting bitcoins to cash via broker exchanges is similar to the currency exchange system at the airports of foreign countries. This method is also known as cryptocurrency exchange since you deposit your bitcoins into the exchange and request a withdrawal in your preferred currency. The broker will transfer your money into the same bank account you used to buy your coins.
Deposit to the same bank account is due to the restrictions by the money-laundering laws. Third-party broker exchanges are considered safe and secure, but the conversion process takes longer. On average, it takes between 4 to 6 days to receive money into your bank account. The exchanges also incur some transaction charges, which differ from broker to broker and country to country.
Bitcoin debit cards and ATMs also operate in the same way as the third-party broker exchanges. Both require you to create an account, sell your bitcoins, and request your cash withdrawal. The major downsides of this service are the high transaction fees.
Steps of cashing out crypto via the third-party broker exchanges
Cashing out your bitcoins via third-party broker exchanges is hassle-free. Below are the straightforward steps that you need to follow.
- Step1: Select your preferred third-party broker exchange. Ensure they support buying and selling in the currency of your choice. Kraken is an excellent brokerage exchange.
- Step 2: Create an account and complete the verification process of your broker
- Step 3: Make a bitcoin deposit into your account
- Step 4: Request withdrawal of your preferred amount into your bank account. Some brokerages also accept withdrawals via Paypal.
- Step 5: Authorize the withdrawal. In most exchanges, you will receive an email requiring you to authorize the transaction. Your funds will reflect into your account after a few days depending on your broker.
If you seek a faster way to convert your bitcoins to cash, a peer-to-peer platform will serve you well. This method allows you to sell your bitcoins directly to another person. The most significant upside of peer-to-peer platforms is that they will have the freedom to choose the payment method you want your buyer to use.
You are also likely to benefit from a higher exchange rate than the third-party broker exchange. Here, the buyer will send cash to your bank account or the banking option of your choice. It is critical to request proof of ID and payment before sending your Bitcoin.
One of the most trustworthy peer-to-peer platforms is LocalBitcoins. Peer-to-peer bitcoin selling is safe if you deal with a reputable platform. You must be careful of fraudsters when using this option. The best way to remain safe is to use a platform that allows you to lock your Bitcoin until you successfully receive your cash.
Imperative considerations when converting bitcoins to cash
Before you sell all your bitcoins to a brokerage or a peer-to-peer platform, you need to consider the following three factors:
- Taxes: Tax is inevitable for bitcoin investors. Most tax authorities will require you to pay taxes from the profits you receive by converting your bitcoins to cash. Reputable third-party broker exchanges report all their transactions for tax purposes. As such, it is hard to ignore these rules.
- Fees: As already mentioned, most bitcoin exchanges to bank accounts incur some fees, especially via brokerages. The peer-to-peer option may be exceptional if the buyer is good enough not to charge you. Some online platforms might charge you.
- Exchange Speed: Using third-party broker exchanges to convert your cryptocurrency to cash may take several days. If you are in a hurry, you may need a peer-to-peer platform.
From this guide, it is fair to conclude that converting сryptocurrency to cash is straightforward. All you need is to ensure you choose a method that meets your needs and preference. As Bitcoin becomes more popular, these options will continue to grow.