How To Cash Out Crypto From An Exchange : A Step-By-Step Guide for Beginners
With more people investing and profiting from cryptocurrency, it has become a mainstream financial asset in many parts of the world. However, the concern of how to easily and safely cash out the crypto remains. Well, there are multiple ways to convert your crypto into cash.
In this article, we will be talking about the best methods to withdraw funds from crypto exchanges effortlessly.
Where To Cash Out Your Crypto?
Crypto Exchanges
The most common and easiest way to convert your crypto into cash is through an exchange. Centralized exchanges like Binance, Coinbase, or Kraken offer an option to sell the crypto to traders in the exchange for fiat currency, which can then be withdrawn through a bank account.
When an order is placed to sell the coin, the exchange matches it with an order from a buyer. Once the orders are matched, the seller’s coins are transferred to the buyer’s wallet, and the seller’s account will be credited with the equivalent amount in the chosen currency.
Crypto Debit Cards
It working similarly to Visa/Mastercard debit cards, allow you to spend digital currencies by automatically converting them into fiat currency at checkout. Crypto debit cards let you use crypto for everyday transactions and purchases, and offer an effortless integration between cryptocurrencies and fiat currencies.
The crypto debit cards provide generous cashback programs, with 1-8% return of the billed amount. However, these cards are not available globally, and cannot be used as a credit card.
Peer-To-Peer Exchanges
Peer-to-peer platforms like LocalBitcoins, Paxful, and Binance P2P allow users to convert crypto into fiat currency without a direct intermediary. The buyers and sellers agree on terms, and escrow services finish the trades.
In P2P exchanges, you can select the convenient payment method through which the buyer can pay for your crypto. Transactions through P2P exchanges are quicker than third-party brokers, and often, the sellers can get a better exchange rate for their crypto at lower transaction fees.
Bitcoin ATMs
Crypto ATMs are physical cubicles that allow users to sell their crypto for immediate cash. The seller can transfer the coins into the machine by scanning a QR code, and the machine dispenses money.
Though they are a convenient option, the Bitcoin ATMs are not the cheapest method of conversion, and are prone to scams. The ATMs offer a straightforward process with minimal setup. A negative side of this method is the high transaction fees, amounting to around 10-15%, and low maximum withdrawal limits.
Over-The-Counter Trading
A popular method of conversion, over-the-counter trading, is suitable for people wanting to sell crypto for cash in large volumes. This method offers privacy, minimal impact on the market, and personalized assistance.
OTC desks match the high-volume buyers and sellers privately, rather than placing a huge sell order on the exchange that can impact the asset price negatively. Exchanges like Binance, Kraken, and Coinbase have dedicated OTC services.
Legal Considerations While Selling Crypto
In the majority of the countries where crypto is legal, selling or using crypto for any purchases is considered a taxable event. Depending on the period of holding the digital asset, you may have to pay either short-term or long-term capital gains tax. Any losses related to the crypto can sometimes nullify or reduce the taxable income.
Fees And Exchange Rate Of Conversion Methods
Regardless of the cashing method, the crypto exchanges charge a certain percentage of the trading amount as fees for the service they offer. These fees are of two types: exchange fees and network fees.
An exchange fee is charged for trading, depositing coins in digital wallets, withdrawals, and liquidations. Network fees are charged for the process, carried out by a network of computers. The total transaction fees range between 0.1% to 1% or more, depending on the exchange service.
| Conversion Method | Typical Fee Range |
|---|---|
| Centralized Exchanges | 0.1% – 0.5% trading fees. Withdrawal fees may vary, based on the amount |
| Crypto Debit Cards | Conversion fees, based on the provider |
| Peer-to-Peer Platforms | Escrow fees; usually a small percentage of the transacting amount |
| Bitcoin ATMs | 7% – 15% or higher |
| OTC Trading | Negotiable; lesser than exchange fees charged for large trades |
Where Does The Cashed Bitcoin Go?
Once the seller sells their crypto, it moves into the wallets of the buyer. Based on the buyer’s intention, the coins might be held in private wallets, kept on exchanges for trading, used for purchases, or converted into other cryptos. Regardless of the action taken by the buyer, the coins remain within the blockchain ecosystem, constantly circulating among the investors and traders.
Conclusion
Figuring out the ideal method for cashing out your crypto can sometimes be overwhelming. Choose the method that suits your needs the best. If simplicity and reliability are your priority, centralized exchanges can be the option.If you want more flexibility, P2P platforms offer a great option. Got to make high-volume sales? OTC desks are the best choice.
Regardless of the method you choose, make sure to do proper research, review your tax obligations, and watch out for scams and risks.
Crypto & Blockchain Expert