Key takeaways
- Centralized exchanges like Binance and Coinbase are the simplest way to sell Bitcoin, offering various withdrawal methods including bank transfers and debit cards.
- Peer-to-peer (P2P) platforms provide more privacy and flexibility with payment options like PayPal, bank transfers and gift cards, but come with a higher risk of scams.
- Bitcoin ATMs offer a convenient way to convert Bitcoin into cash but typically have high fees and transaction limits.
- Over-the-counter (OTC) trading is good for large Bitcoin transactions as it allows you to avoid market price slippage, though it comes with liquidity risks and requires trusted brokers.
Perhaps you want to lock in some of your Bitcoin (BTC) profit, need cash for personal expenses or simply want to exit the crypto market for a while.
Whatever the case, knowing how to cash out your Bitcoin holdings is crucial for getting the most out of your sale.
Choosing the best Bitcoin withdrawal method can make a big difference. Whether you prefer the simplicity of selling on a centralized exchange, the privacy of a P2P trade or the convenience of Bitcoin ATMs, each approach comes with its own pros and cons.
This guide walks you through the major ways to sell Bitcoin and helps you decide which method is best for you. It also offers some tips for safe and secure trading along the way.
Direct selling via exchanges
Centralized exchanges like Binance, Coinbase and Kraken are among the easiest ways to sell Bitcoin. If you’re holding BTC and want to cash out, here’s how you can do it.
First, sign up for an exchange. You’ll need to complete some form of Know Your Customer (KYC) verification, usually by uploading an ID and proof of address. Once verified, deposit your Bitcoin into your exchange wallet. Most platforms provide a clear “Sell” option for Bitcoin, where you can choose to sell at market price or set your own price.
After selling, you’ll have fiat currency in your account. From there you can withdraw the funds in several ways, depending on the exchange.
- Bank transfer: Most exchanges, like Coinbase and Kraken, allow you to transfer fiat directly to your bank account. This is the most straightforward method, though processing times and fees vary. For example, Coinbase charges about 1.5% for fiat withdrawals, while Kraken’s fees may be lower, depending on your country. With a bank transfer, the funds move through the traditional banking system via an automated clearing house, wire transfer or the Single Euro Payments Area (SEPA).
- Debit card withdrawals: Some exchanges, like Binance, offer withdrawals directly to a debit card. Debit card networks such as Visa and Mastercard handle the withdrawal, making it faster than bank transfers but sometimes at a higher cost.
- Third-party payment services: Exchanges often integrate services like PayPal or SEPA for users in certain regions. PayPal is especially popular for fast, low-cost withdrawals, but not all platforms support it. SEPA transfers are a common option in Europe and are typically low-cost.
- P2P withdrawal: Some platforms, like Binance, also offer a P2P service through which you can sell Bitcoin to other users for local fiat currencies. You choose a buyer, and once the payment is confirmed, Binance releases the BTC. It’s a bit more hands-on but offers flexibility, especially if you prefer payment methods like cash or bank transfer outside the exchange. There will be more on this withdrawal method later.
Make sure to check fees and withdrawal limits. For example, Binance offers low trading fees (as little as 0.1%), but withdrawal fees vary depending on the method.
Security is crucial when using exchanges. Stick to trusted, well-established platforms and always enable two-factor authentication to protect your account. If you’re not making frequent trades, it’s smart to move funds off the exchange to a secure wallet after completing your sale.
Did you know? Centralized cryptocurrency exchanges often hold a substantial portion of users’ crypto assets in cold storage — offline wallets that aren’t connected to the internet — to enhance security and protect against hacks. For example, Binance reportedly keeps over 90% of its funds in cold storage to safeguard user assets.
P2P platforms
While certain centralized exchanges will offer a P2P portal, there are dedicated platforms like LocalBitcoins and Paxful that allow you to sell Bitcoin directly to other users, bypassing the need for a centralized exchange.
The process of selling Bitcoin on a P2P platform is relatively simple. After signing up and completing any necessary identity verification, you can list your Bitcoin for sale. Here’s a step-by-step breakdown:
- Finding buyers: You create an offer that specifies the amount of Bitcoin you’re selling, the price, and the payment method. Buyers browse through available offers and choose when to initiate trades. Alternatively, you can browse buyers’ requests and agree to their terms.
- Payment methods: P2P platforms offer a wide range of payment methods, including bank transfers, PayPal, mobile payments, gift cards or even cash in person. The flexibility in payment options is one of the biggest draws of P2P platforms.
- Escrow system: Once a buyer agrees to your offer, the platform locks your Bitcoin in an escrow account while the buyer sends the payment. This protects both parties. After the payment is confirmed, you release the Bitcoin to the buyer, completing the transaction.
P2P sales offer more privacy and flexibility compared with centralized exchanges, as they let you trade with minimal KYC and choose from a variety of payment methods including PayPal, cash or gift cards. You may avoid high exchange fees as well. Still, there’s a higher risk of scams, especially with reversible payment methods like PayPal, so it’s key to trade with verified buyers. While the platform fees might be low, some payment methods come with their own costs, and the process may take longer as you wait for buyers and payments to clear.
Bitcoin ATMs
Bitcoin ATMs are physical kiosks that let you buy or sell Bitcoin for cash. They’re a convenient option if you prefer to deal with cash and avoid traditional banking channels. The process is pretty straightforward: You locate an ATM, scan your wallet QR code, send Bitcoin, and once the transaction is confirmed, you receive cash.
To find a nearby Bitcoin ATM, you can use services like Coin ATM Radar, which provides a map of machines in your area. Once you find one, the process typically involves verifying your identity and confirming how much Bitcoin you want to sell. Be aware that most ATMs have daily limits.
The biggest advantage of Bitcoin ATMs is their convenience. You can get cash quickly without having to wait for bank transfers. The downside is that fees can be steep, sometimes as high as 15%. So, while ATMs are great for quick access to cash, they’re not ideal if you’re looking to sell large amounts or avoid high costs.
Did you know? The first-ever Bitcoin ATM was installed in a coffee shop in Vancouver, Canada, in 2013. Since then, the number of Bitcoin ATMs worldwide has multiplied, with more than 35,000 machines now in operation across more than 75 countries!
Over-the-counter trading
OTC trading refers to private, direct transactions between buyers and sellers, typically arranged through brokers or specialized services. Unlike public exchanges where trades affect the market, OTC deals happen off-exchange, making them suitable for handling large Bitcoin transactions without moving the market price.
The main benefit of OTC trading is the ability to sell significant amounts of Bitcoin without causing price slippage. For example, if you’re offloading a large volume of BTC on a regular exchange, it could push the price down, reducing your return. OTC desks provide a more controlled environment, ensuring your trade is executed smoothly and privately.
To access OTC services, you can go through major exchanges like Coinbase Prime or Binance, which have specialized desks for high-volume traders. These platforms connect you with institutional buyers or other large sellers and often assign a dedicated broker to handle the transaction.
The standard minimum trade size for OTC transactions typically starts at $50,000, though it can vary depending on the platform. For example, Kraken’s OTC service is accessible for traders looking to move $100,000 or more, while Binance has a minimum trade of $10,000.
OTC trading does come with risks. Since these transactions are less transparent than those on public exchanges, you need to ensure you’re working with a reputable broker to avoid the potential for fraud. Pricing might also differ slightly from the market rate, and liquidity can vary depending on the size of the trade, so it’s important to do your homework before proceeding.
Did you know? The largest known over-the-counter Bitcoin trade took place in 2013 when an anonymous buyer reportedly purchased 194,000 BTC for about $147 million. At today’s prices, that trade would be worth billions!
Selling Bitcoin for goods and services
Using Bitcoin as a payment method is becoming more common, allowing you to spend BTC without converting it into fiat currency. Many websites and businesses now accept Bitcoin for a wide range of goods and services. For example, major companies like Microsoft, AT&T and Overstock allow customers to pay with Bitcoin. You can also use BTC on platforms like Bitrefill to buy gift cards for retailers or services like Amazon, Airbnb and Uber.
One major advantage of directly spending Bitcoin is avoiding the hassle and fees associated with converting it to fiat. You’re also taking part in the broader movement to adopt crypto as a regular payment method. Additionally, spending Bitcoin can be a more tax-efficient strategy in certain regions, as it may help you avoid capital gains taxes that come from selling your BTC.
The value of Bitcoin can fluctuate, so the BTC you spend today could be worth more tomorrow. Still, if you prefer to use your Bitcoin for real-world purchases rather than cashing out, more merchants are accepting it, giving you a wider range of options.
Converting Bitcoin to stablecoins
Converting Bitcoin to stablecoins, such as USDt (USDT) or USD Coin (USDC), is an alternative to cashing out into fiat. Stablecoins are digital currencies pegged to the value of traditional assets like the United States dollar, which means their price remains relatively stable. This makes them a useful option for avoiding the volatility of Bitcoin without leaving the crypto market.
The main benefit of converting to stablecoins is that you can lock in the current value of your Bitcoin without the fluctuations. For example, if Bitcoin’s price drops, your stablecoins will maintain their value, giving you flexibility to reenter the market when the price is more favorable. Additionally, stablecoins allow you to easily move funds across different exchanges or use them to trade other cryptocurrencies without converting to fiat.
To convert Bitcoin to stablecoins, you can use most major exchanges. The process is simple: After depositing your Bitcoin, you select the stablecoin of your choice (like USDT or USDC) and execute the trade. Since stablecoins are widely available, you can easily switch back to Bitcoin or other cryptocurrencies whenever you’re ready, offering both security and flexibility during volatile market periods.
Wishing you smart, safe trading
When selling Bitcoin, it’s important to be aware of the tax implications, as these can vary significantly from one country to another.
For example, in the US, Bitcoin is treated as property, so any sale is subject to capital gains tax. You’ll need to report the difference between the purchase price and the sale price on your tax return.
In contrast, Germany offers a more favorable approach; if you hold Bitcoin for longer than a year, any gains are tax-free, which encourages long-term holding.
In Australia, Bitcoin is also subject to capital gains tax, but you can offset losses from other investments against your gains from selling BTC.
Reporting requirements differ as well. In the US, exchanges like Coinbase may send you a 1099 form to help with your filing, while in Japan, Bitcoin sales are considered “miscellaneous income,” requiring a different type of reporting.
Along with tax considerations, you’ll want to focus on maximizing profits and minimizing fees. Timing your sale is critical. Monitor the market for good conditions and avoid high-fee methods like Bitcoin ATMs when possible. Opt for low-fee exchanges like Binance or Kraken, and always ensure your transactions are secure by enabling two-factor authentication.
Otherwise, happy BTC withdrawals!