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Cryptocurrencies rebounded sharply in 2023, helping some traders post solid profits. While prices are still lower than all-time highs in late 2023, crypto holders may be looking to cash in on the current market enthusiasm and there are plenty of ways to convert your crypto into cash.
If you’re selling assets, you’ll want to understand the tax implications. You may owe a bundle if you make a capital gain. The tax rate depends, among other things, on the period of ownership. Of course, you may be able to claim a write-off if you sell at a loss. But if you think crypto will continue its recovery, it might be better to keep waiting.
Here are five ways you can cash out your crypto or Bitcoin.
1. Use an exchange to sell crypto
One of the easiest ways to cash out your cryptocurrency or Bitcoin is to use a centralized exchange like Coinbase. Coinbase has an easy to use ‘buy/sell’ button and you can choose which cryptocurrency you want to sell and for what amount.
You quickly convert cryptocurrency into cash, which you can access through your cash balance in Coinbase. From there you can transfer the money to your bank account if desired.
And while Coinbase is a popular option for selling cryptocurrency, if you don’t have custody of the coins yourself, it’s probably most useful to go with whatever exchange currently holds your coins. Some of the best exchanges are Binance and Kraken.
2. Use your broker to sell crypto
If a broker holds your crypto, the easiest route is to simply go with that broker. For example, if you are a customer of Robinhood or Webull, both of which allow extensive crypto trading, then it will be easiest for you to just make a trade on their platform and be done with it.
Once you complete the trade, you will have the money in your account and you are ready to trade again.
With the introduction of spot Bitcoin ETFs in 2024, investors will have an easy way to buy and sell Bitcoin using a familiar structure. ETFs are exchange traded and available from most brokers, and the expense ratios of several funds are lower than what you would pay to trade on a crypto exchange.
3. Go for a peer-to-peer transaction
You can also trade directly, where you sell your cryptocurrency directly to someone else through another entity. The most popular way is through a peer-to-peer online platform that allows sellers to find the best deals through an exchange, although you can even do this in person if necessary.
An online peer-to-peer trading allows you to sell cryptocurrency online in exchange for dollars. These transactions are often facilitated by an exchange, and Binance operates a well-known online peer-to-peer platform called Binance P2P. After you agree to a transaction, the platform stores your crypto. Once you check the transaction details in the checking account and are sure that you have received the money from the buyer, Binance will release the crypto to the buyer on the platform.
Another popular option is the online platform Paxful. Sellers have the ability to set their own rates and choose from more than 350 payment options, such as cash, gift cards or other digital currencies. According to the platform’s website, customers can sell directly to more than 12 million users worldwide.
4. Cash out at a Bitcoin ATM
Cashing out at an ATM is the equivalent of selling your Bitcoin, says California Bitcoin ATM company Hermes Bitcoin. Bitcoin ATMs are a way to get instant access to cash with your bitcoins. Bitcoin ATMs do not work like traditional ATMs. To withdraw cash and sell your Bitcoin from the ATM, the machine passes a QR code to which you send your Bitcoin. You just wait a few minutes and receive your money.
However, the commissions on Bitcoin ATM transactions can be extremely high, so it’s important to know how much you’re paying and whether it’s worth going another route.
5. Exchange one cryptocurrency for another and then cash out
Some exchanges do not allow the conversion or sale of some cryptos to dollars, so you will have to take an indirect route to get your money. Depending on which exchange you use, you may need to transfer or convert your cryptocurrency to another popular currency, such as the stablecoin Tether, before finally converting it into dollars.
In short
Traders have a number of ways to sell their cryptocurrency. Popular crypto exchanges are always a good choice as they are reliable and well-known, while online platforms with peer-to-peer selling allow flexibility in payment. You can take the easy route and use a Bitcoin ATM to quickly access your crypto, but at a significantly higher commission.
However, if you sell your cryptocurrency, it’s important to understand that you may be creating a tax liability, so you want to make sure you take taxes into account when deciding to sell.
Former Bankrate reporter Georgina Tzanetos contributed to an earlier version of this article.
