So you own bitcoin, and you’re ready to turn it into cash? Luckily, now that bitcoin (BTC) has been around for over 10 years, the industry has caught up, providing several great options for converting bitcoins into cash, which we’ll discuss in this article.
Why Transfer Bitcoin To Your Bank Account?
The idea that bitcoin will eventually replace fiat currencies* is the reason so many people are investing in it now. In theory, you will one day be able to use bitcoin for any type of purchase when it replaces fiat currencies, like U.S. dollars, which will no longer be necessary.
For now, however, there are still relatively 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. Another reason is when the market is in decline. If you think the price of bitcoin is going to keep sinking and you want to protect yourself from losses, it makes sense to convert bitcoin to cash while you wait for the bitcoin price to recover.
*Fiat money is another name for government-issued currency (e.g., U.S. dollar, Euro, etc.) which means it is not backed by a physical commodity such as gold or silver.
How Can You Move BTC To A Bank Account?
There are several ways to convert bitcoin to cash and ultimately move it to a bank account:
- Sell bitcoin on a cryptocurrency exchange, such as Coinbase or Kraken. This is the easiest method if you want to sell bitcoin and withdraw the resulting cash directly to a bank account. To make sure brokers do not break money laundering laws, 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. For the U.S., 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. Coinbase is the most popular broker exchange for buying and selling bitcoin. They process more bitcoin transactions than any other broker and have a massive customer base of 13 million. The steps:
- Sign up and complete the verification process.
- Deposit (or buy) BTC into your account
- Cash out your BTC to fiat via bank transfer or PayPal (applicable to some services)
- Bitcoin ATMs: Unlike traditional ATMs where you can withdraw currency from a bank account, a bitcoin ATM is a physical center that allows you to buy or sell bitcoins with fiat money. As of writing, there are over 4990+ crypto ATMs across 76 countries and you can use the website Coin ATM Radar to find a bitcoin or other crypt currency ATM near you. Keep in mind that not all machines are the same, and this method is only suitable for small transactions because most ATM machines have deposit and withdrawal limits The biggest drawback of using a bitcoin ATM is its high transaction fee, which typically ranges between 7-12%.
- Bitcoin Debit Cards: Several websites allow you to sell bitcoin and receive a prepaid debit card in exchange, allowing you to use it like a regular debit card. Each card is powered by either VISA or Mastercard, which means that they work for both online and offline shopping at most businesses anywhere in the world. Aside from purchases, you can even use bitcoin debit cards to withdraw cash at ATMs where VISA or Mastercard are accepted.
- Peer-to-Peer Transactions: 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. These include:
- Cash deposit: You can ask the buyer to deposit cash into your bank account. Always ask for proof of ID and proof of payment before releasing your Bitcoins to them.
- Bank Transfer: You can ask the buyer to send you a bank transfer payment (you can even use PayPal). Always request proof of ID from the buyer before going ahead. Once you have received the money, you can release the bitcoins to them.
A sample transaction would go something like this:
- George wants to buy 1 bitcoin so he searches for sellers in his country. George sees that David is selling 1 bitcoin at a good price, and he also accepts bank transfer as a payment option.
- George sends his request for 1 bitcoin to David, and David accepts.
- David puts his 1 Bitcoin into the escrow. This holds the bitcoin until George transfers the money to David.
- George transfers the agreed amount into David’s bank account.
- When David has received the payment, he releases the Bitcoins from the escrow, which is then sent to George’s account. That’s it!
A peer-to-peer platform like LocalBitcoins serves more than 1.35 million people from 15,000 cities across 249 countries, and offers a good level of safety with their escrow service, which keeps bitcoins locked until you confirm the payment has been received from the buyer. LocalBitcoins is free to use unless you create an advertisement for selling your bitcoins, then there is a small percentage fee charged.
Things To Remember About Converting Bitcoin To Cash
Before you convert all of your BTC to a bank account, keep in mind the following pitfalls associated with converting bitcoin to cash:
- Taxes. Death and taxes are inevitable, even for bitcoin investors. Although some jurisdictions have yet to clarify their stance on bitcoin and taxes, most tax authorities say that you have to pay taxes on profits that you may make when selling bitcoin for cash. And lest you think you can simply ignore those rules, keep in mind that some bitcoin exchanges will report your profits to the tax man when you cash out.
- Fees. Most of the BTC-to-bank-account methods described above entail exchange fees. (Selling bitcoin directly to your friends may be an exception, assuming your friends are nice enough not to charge you transaction fees.)
When you’re ready to convert bitcoin to cash, consider such things as the cost and ease of the cash out method, where you want it deposited (bank account, PayPal, etc.) the type of currency (i.e., country) you need to convert your bitcoin to, and how long you want to wait to receive your cash. Whatever your needs, there’s a method that can fit and the options continue to grow as bitcoin becomes more common and accepted throughout the world.