How to sell Bitcoin: 5 ways to ‘cash out' your BTC holdings
“How do you sell Bitcoin?” is one of the first questions that arise when people become interested in buying cryptocurrencies, since getting your money out is just as important as investing.
Selling Bitcoin (BTC) can be similar to buying Bitcoin, except in a somewhat reversed process. To sell BTC, you must first have BTC on hand in your wallet.
Buying Bitcoin is possible via a number of routes. When you are ready to sell some or all of your Bitcoin, you can do so through a variety of avenues, including an online cryptocurrency exchange, direct peer-to-peer (P2P) transactions online or on-site, and through a Bitcoin ATM.
Despite having several disadvantages, exchanges are a one-stop solution when it comes to trading Bitcoin. In the case of selling the cryptocurrency, exchanges act as an intermediary, holding sellers’ and buyers’ funds.
To use a crypto exchange, you must set up an account with the platform of your choice. Many reputable exchanges require identity verification. Connecting a bank account is necessary for withdrawing cash. Be mindful of exchange restrictions based on your country, however. Some exchanges ban participation from certain regions.
Once you have an account on an exchange and have transferred your Bitcoin to that exchange (or if you already have an account with Bitcoin held in it), simply place a sell order, stating the type of currency you wish to trade, its amount, and your asking price per unit. The exchange will automatically complete the transaction once someone matches your offer. Trading crypto, however, can be much more complicated than this brief description, with multiple order types and more.
For more on trading, read: How to trade cryptocurrencies: The ultimate beginner’s guide
After the funds are credited to your account, you will need to withdraw them to your connected bank account. This can sometimes take an excessive amount of time, especially if the exchange is experiencing issues with its banks or facing liquidity problems. Several months before its bankruptcy, the Mt. Gox exchange experienced this exact problem. Moreover, some banks just outright refuse to process transactions with funds obtained via cryptocurrency trading.
It is also important to be mindful of any withdrawal fees that may come into play on your platform of choice. In addition, exchanges may have a limit on the amount of money you’re allowed to withdraw within a certain period. The limit may increase over time if you stay loyal to a particular platform or if you upload additional documentation to complete Know Your Customer (KYC) and Anti-Money Laundering (AML) verification requirements.
Finally, it is important to remember that despite offering wallet services, exchanges are by no means a secure, reliable place to store your funds. They can be targeted by hackers, and there have also been instances where exchanges have shut down amid their owners either mismanaging users’ funds or running away with users’ money.
Another potential option for selling BTC involves selling into a stablecoin on an exchange and then withdrawing those holdings to a personal wallet off of the exchange. You can also simply keep those funds on the exchange, although doing so comes with its own pros and cons. It is advisable to take full responsibility for your own funds and store in a secure offline wallet any amount that is not immediately needed. Furthermore, withdrawing to a personal wallet off the platform gives you more control over your funds.
A stablecoin is a digital asset pegged to the value of an underlying asset — typically a fiat currency, such as the U.S. dollar. A number of stablecoins exist for which you can exchange your BTC.
Another roundabout method of selling your BTC using the services provided by a cryptocurrency exchange is by spending it via one of the many crypto-focused payment cards on the market.
There are several methods to how such cards operate. Generally speaking, users’ assets are exchanged into cash at the point of the sale, making the cards usable at locations that accept traditional payment cards. Alternatively, some cards allow users to load stablecoins onto a crypto-friendly card and not be subject to the volatility associated with cryptocurrencies.
Direct trades (person-to-person)
Another way of selling your Bitcoin is via a direct trade with another entity, either online or in person. There are several ways to achieve this, either by setting up a direct meeting to sell Bitcoin in person or by performing the transaction online through a specialized platform.
Online P2P selling
With online P2P Bitcoin sales, several specialized platforms — and even products from reputable cryptocurrency exchanges — exist to facilitate such transactions. In one way or another, these platforms essentially make it possible to trade Bitcoin for cash, or vice versa, with another party online.
In general, Bitcoin buyers post listings on these platforms, noting their desired price, their preferred payment option, etc. Interested parties then find listings they like and complete the sale by following the instructions provided by the platform.
These platforms typically involve escrow functions to provide a level of security for both parties and to help ensure asset transfer. Depending on the payment option, the seller of the Bitcoin may receive a transfer directly to their bank account or card, a wire transfer, or an agreement to receive funds to some of the popular traditional payments platforms.
Selling Bitcoin P2P at an in-person location is also a possible method. Some online platforms facilitate selling BTC in person for cash, while parties may also simply choose to meet up with friends or family on their own and sell Bitcoin for cash. Selling Bitcoin in person requires you to understand how to send Bitcoin and work with a crypto wallet, or the platform on which you hold your funds (such as if you hold your funds on an exchange, for example).
Bitcoin’s value constantly fluctuates, so it’s important to know its price at the time of an in-person sale. Most traders use rates from prominent exchanges. Alternatively, services such as Cointelegraph’s Bitcoin Price Index can be used to identify the latest price of the crypto asset.
In some parts of the world, physical locations or shops also exist at which participants can go to exchange Bitcoin for physical currency, or exchange physical currency for Bitcoin.
It is important to take into account, however, that Bitcoin can trade at different prices across exchanges, and at differing prices in various regions globally. This discrepancy is called a “premium.” Essentially, a Bitcoin price premium is the amount at which an asset trades above or below the rest of the market or an underlying asset’s price (when referring to other types of trading, such as futures).
Bitcoin commonly trades at comparatively higher prices in South Korea — a market state that has been labeled the “Kimchi premium.” The Coinbase Pro crypto exchange has also been known to have a Bitcoin price premium.
If you organize an in-person Bitcoin sale with a stranger, whether via a platform or otherwise, it is important to exercise caution. Potential dangers exist when trading Bitcoin in person with strangers, similar to the risks that come with other in-person financial transactions.
Despite looking like traditional cash machines, Bitcoin ATMs are not ATMs in the traditional sense. Instead of connecting to the user’s bank account, they are connected to the internet to facilitate Bitcoin transactions.
At their simplest, Bitcoin ATMs let you scan a wallet QR code and then sell BTC for cash. Bitcoin ATMs are located all over the world, and their locations can be easily found on the internet. However, they usually charge high transaction fees when compared with other methods. In addition, not every Bitcoin ATM offers both buy and sell functionality, which is important to keep in mind when looking for a Bitcoin ATM at which to sell BTC.
Sometimes, Bitcoin ATM providers require users to have an existing account to conduct selling operations, and the registration process often involves a lot of time, energy and effort. For example, new users may need to provide a telephone number for activation and notifications, a government-issued ID, a palm scan and a current photo taken by the ATM’s camera. The identification process varies depending on the machine and the operator running it, but some sort of identity verification will always be required if you want to sell Bitcoin.
Moreover, BTC ATM operators must adjust the settings on their machines in accordance with AML and KYC requirements applicable in the jurisdiction where their ATMs are placed. In some countries, this requires a money transmitter license, while current regulations in other countries prevent any Bitcoin ATMs from being installed.
After your identity is verified, you are given a QR code with a wallet address to which you need to send your Bitcoin. Depending on the machine you’re using, you will either get cash out of the machine immediately or you will receive a redemption code and will need to wait for the transaction to be confirmed on the Bitcoin blockchain. Usually, one confirmation is enough, but sometimes up to six confirmations are required before you can withdraw cash.
A common way to move Bitcoin into cash is through withdrawing the cash to a bank account via a wire transfer or automated clearing house (ACH) transfer after selling your BTC on a crypto exchange.
Alternatively, money can be transferred via the Single Euro Payments Area, or SEPA, which services the transfers in the euro. It is a system designed to make international transfers between members of the European Union more efficient. Some European cryptocurrency exchanges accept this way of transferring.
Both of these systems are far from perfect, however. Transfers can take a long time, depending on the country and the amount of money being transferred, and processing can take days. Moreover, these systems can incur additional charges.
For example, some banks may charge a fixed fee for a SEPA payment, which could rise depending on how quickly you want the transfer to take place. It is also worth noting that some banks may look unfavorably upon facilitating transfers to and from accounts associated with cryptocurrency companies.
So, if you’re opening a bank account specifically for withdrawing money made from Bitcoin sales, you need to do your research and choose the bank that best suits your needs.