Did you know that 16% of Americans have invested in cryptocurrency? This shouldn’t surprise anyone who pays attention to the news. Entire fortunes have been built on this exciting new form of currency.
There are many different types of cryptocurrencies to choose from, but Bitcoin remains the most popular. But what exactly is Bitcoin? And how do you convert Bitcoin to cash?
If you want to learn the answer to this question, and more, you’re in the right place. In this guide, we’ll go over all your options for converting any Bitcoin you have to cold, hard cash. Let’s get started!
What Is Bitcoin?
Before we learn how to convert Bitcoin to cash, it’s important to understand exactly what this cryptocurrency is. Bitcoin is a form of digital that’s stored on a public blockchain.
Typically, a government or central authority (like a bank) will control the supply of currency. That’s not the case with Bitcoin. There is no CEO in charge of producing more Bitcoin.
Instead, there will only be a limited number of Bitcoins produced, specifically twenty-one million. This amount is mined by willing participants in a massive peer-to-peer network.
The limited supply is what gives a single Bitcoin such a large value. That, and the fact that it can be transferred anywhere in the world without any government interference.
The unbreakable nature of the blockchain also makes transactions with Bitcoin much more secure than other types of investments.
Why Would You Convert Bitcoin to Cash?
Sadly, there are very few ways where you can spend Bitcoin like regular money. It’s true that some websites will accept Bitcoin as a currency.
But we’re still a long way from being able to spend Bitcoin at the local grocery store.
That’s because Bitcoin is often viewed more as a commodity to invest in, kind of like gold or other precious metals. It’s true the price of Bitcoin can be volatile.
But, it’s ultimately expected to increase in value. Because of this, it makes sense to hold on to your Bitcoin. However, if the value of Bitcoin has suddenly spiked, it might make sense for your financial situation to convert it to cash.
We recommend converting your Bitcoin to cash if you need a lot of money for a big financial purchase (like putting a down payment on a house).
Different Ways to Convert Bitcoin to Cash
There is no one set way to convert your Bitcoin to cash. Instead, you have multiple options you can choose from.
In this section, we’ll be going over some of the different methods and their pros and cons.
If you’re like most people, then you likely used a cryptocurrency exchange to acquire your Bitcoin in the first place. If this is the case, then this is the most convenient to convert your Bitcoin to cash.
With a cryptocurrency exchange, Coinbase or Kraken, you can sell your Bitcoin for cash which is then transferred to your bank account.
Keep in mind that most exchanges will require you to deposit the money in the bank account that you used to purchase your Bitcoin. That way, they aren’t breaking any money laundering charges.
Most of the time, the process of converting with exchanges is quick, easy, and safe. However, if you haven’t used the exchange before then, you will need to start a new account.
Also, make sure you’re going with a verified exchange. There are a lot of scam artists out there looking to rob you of your Bitcoin.
So, do some research on the cryptocurrency exchange before you ever use it.
There are now physical exchanges emerging around the world in the form of Bitcoin ATMs. These are physical locations found in major cities that allow you to buy and sell Bitcoin.
Compared to other methods, this is probably the fastest way to get your Bitcoin converted to cash. What’s more, you don’t need a bank account to use them.
All you need to do is log into your digital wallet, then begin the selling process. The only problem is that these Bitcoin ATMs tend to come with expensive processing fees.
What’s more, you’ll have a hard time finding them if you aren’t located in a major city.
So, they aren’t a great option for people looking to sell in rural areas. Make sure to check out this resource if you want to learn more about how Bitcoin ATMs work.
Alternatively, you can sell your Bitcoin directly to the party that wants it through a peer-to-peer transaction. There are many platforms that allow you to do this.
One thing that’s nice about this method is the flexibility. You can have the money from your sale sent to your bank account, organize a cash sale, or even use PayPal.
What’s more, you’re not as likely to encounter huge fees as the kind found in third-party exchanges. The problem is that there are a lot of scam artists out there when it comes to the peer-to-peer transaction.
As such, it’s not as safe as some of the other methods. As such, you should always ask the buyer for proof of ID and payment proof before you ever release your Bitcoins.
Most peer-to-peer platforms will set up an escrow account for this purpose. This allows you to confirm that the payment went through before giving the buyer their Bitcoins.
Bitcoin Debit Cards
Bitcoin debit cards work a lot like traditional debit cards. The main difference is that instead of drawing money from your bank account, it draws money from your crypto wallet.
Not only can you convert your Bitcoin money to cash, but you can also change it to many other major cryptocurrencies.
It’s a quick and easy process, and it allows you to cash out a little or a lot, depending on your needs. The downside? It’s only available in the United States. And similar high ATM fees apply to debit cards.
What Should You Consider Before Converting Bitcoin to Cash
Regardless of which method you choose to convert your Bitcoin, you’re likely to encounter some unexpected obstacles. These can come in the form of long wait times and hidden costs.
In this section, we’ll be going over all of these things. That way, you can properly consider everything before finalizing the Bitcoin conversion.
Most Bitcoin platforms will charge a conversion fee in exchange for using them. This is how businesses make money. Unfortunately, these fees can seriously cut into any profit you make off of your conversion.
Third-party exchanges and Bitcoin ATMs tend to charge the most in terms of fees. However, keep in mind that you’re paying for the convenience.
If you want to pay fewer fees and get a better Bitcoin price, you can go with a peer-to-peer sale. But, this will require more organizing and risk on your part.
Bitcoin cash conversions are rarely quick. Even fast methods, like Bitcoin ATMs, will still take a couple of hours to complete the conversion process.
Other methods, like cryptocurrency exchanges, will usually take four to five days to complete the transaction.
As such, you shouldn’t expect instant cash from your Bitcoin transaction. There are options that are faster than others, but everything will require at least a minor wait.
The tax laws surrounding Bitcoin are changing every day. Some countries still haven’t passed any, but others are starting to crack down on the way investors use them.
These days, most tax laws say that you will need to pay taxes on any profit you make from selling your Bitcoin. So, keep this in mind when you prepare your taxes at the end of the year.
And don’t think you can avoid them. If you sell your Bitcoin using a third-party exchange, the platform will automatically report your sale to the tax authorities.
So they’ll know if you’re not reporting something in your tax form at the end of the year.
Appreciate Learning About Bitcoin Conversion? Keep Exploring
We hope this article helped you learn how to convert Bitcoin to cash. Sadly, infrastructure isn’t advanced enough to point out where you can just spend cryptocurrency in a store.
The good news is that converting your cryptocurrency to cash is relatively easy. As long as you follow the advice in this article, you should be fine.
Want more content about cryptocurrency? If so, keep exploring our website to find dozens of similar articles just like this one.
Suman(Kul Prasad) Pandit is a graduate from Tribhuvan University with four-year experience in corporate and start-up sectors in UK and USA. Being a responsible & sustainable business enthusiast he is dedicated to business education to solve problems in entrepreneurship and business growth.