Since the decline of cryptocurrencies in late 2021, you might be contemplating how to divest from your investment. Despite the downturn in the crypto market, there is a silver lining: traders have several avenues to exchange their digital assets for U.S. dollars. However, it is worth noting that certain entities have hindered investors from converting their crypto into tangible currency.
When selling any asset, it is crucial to consider the tax implications. If you are realizing a capital gain, the tax rate will depend on factors such as the holding period. In such cases, you might owe a considerable amount. On the other hand, if you are selling at a loss, you may be eligible for a write-off. However, if you believe that the cryptocurrency market may recover, it might be wiser to remain patient and wait for the downturn to pass.
Discover five effective methods to convert your cryptocurrency or Bitcoin into cash effortlessly.
1. Use an exchange to sell crypto
A convenient method for converting your cryptocurrency or Bitcoin into cash is by utilizing a centralized exchange like Coinbase. With its user-friendly interface, Coinbase offers a straightforward “buy/sell” feature that allows you to select the specific cryptocurrency you wish to sell and determine the desired amount. This streamlined process ensures ease of use while maintaining the original intent.
You can easily convert your cryptocurrency into cash, which you can then access from your Coinbase cash balance. If desired, you have the option to transfer the funds to your bank account.
Although Coinbase is a popular choice for selling cryptocurrency, it is generally more convenient to use the exchange where your coins are currently held if you do not have custody of them. Notable exchanges like Binance and Kraken are among the top options available.
2. Use your broker to sell crypto
If your crypto coins are held by a broker, the simplest option is to stick with that broker. For instance, if you are a client of Robinhood or Webull, both of which offer extensive crypto trading, it would be most convenient for you to execute a trade on their platform and be done with it.
Once the trade is completed, you will have the cash in your account and be ready to trade again.
3. Go with a peer-to-peer trade
Another option is to engage in a direct trade by selling your cryptocurrency directly to another individual through a separate entity. The prevailing method involves utilizing a peer-to-peer online platform, which enables sellers to identify the most favorable offers via an exchange. However, in certain circumstances, one may even opt for an in-person transaction.
By engaging in online peer-to-peer trading, you have the opportunity to exchange your cryptocurrency for dollars. These transactions are typically facilitated by an exchange, and Binance is a well-known platform that offers an online peer-to-peer service called Binance P2P. Once you agree to a trade, the platform secures your crypto through escrow.
After confirming the transaction details in your payment account and verifying that you have received the payment from the buyer, Binance will release the cryptocurrency to the buyer on the platform.
Paxful, an online platform, is another popular choice. Sellers have the flexibility to set their own rates and select from over 350 payment options, including cash, gift cards, and various digital currencies. According to the platform’s website, clients can sell directly to a global community of over 12 million users.
4. Cash out at a Bitcoin ATM
According to Hermes Bitcoin, a Bitcoin ATM company based in California, cashing out at an ATM is essentially equivalent to selling your Bitcoin. Bitcoin ATMs provide a convenient way to quickly convert your bitcoins into cash. However, it’s important to note that Bitcoin ATMs function differently from traditional ATMs. To withdraw cash and sell your Bitcoin at the ATM, the machine generates a QR code to which you can send your Bitcoin. After a brief waiting period, you will receive your cash.
The fees associated with Bitcoin ATM transactions can be exorbitantly high. Therefore, it is crucial to carefully consider the amount you are paying and determine whether it is worthwhile to explore alternative options.
5. Trade one crypto for another and then cash out
Certain exchanges restrict the conversion or sale of certain cryptocurrencies to dollars. To obtain cash, you’ll need to take an indirect approach. Depending on the exchange you utilize, you may have to transfer or convert your cryptocurrency to another widely accepted currency like the stablecoin Tether before ultimately converting it to dollars.
Cryptocurrency traders have various options when it comes to selling their digital assets. Established crypto exchanges are a reliable choice, known for their credibility. On the other hand, online platforms that facilitate peer-to-peer transactions offer flexibility in terms of payment methods. Alternatively, for the sake of convenience, one can opt for a Bitcoin ATM to quickly access their crypto, albeit at a higher commission rate.
If you decide to sell your cryptocurrency, it is crucial to be aware that it may result in a tax obligation. Therefore, it is important to carefully consider the tax implications before making the decision to sell.