Since its launch in 2009, Bitcoin (BTC) has come a long way. Now, you can sell your Bitcoins, convert them into cash, and transfer the equal value to your bank account. In this article, we will discuss how to convert Bitcoin into real money. But first, why should you do it?
Why Transfer Bitcoin To Your Bank Account?
The idea behind Bitcoin or cryptocurrency, in general, was that they will eventually substitute fiat currencies. In theory, one day you’ll be able to use Bitcoin to buy anything when it dethrones fiat currencies such as US dollars.
However, at the moment, there are very few individuals or businesses that accept payment in Bitcoin or cryptocurrency. One of the reasons you might want to convert Bitcoin into real money is to use the value of Bitcoin to purchase actual things. A different reason for converting bitcoins into real money is to protect yourself from losses as the crypto market declines.
How to Move Bitcoin To A Bank Account?
Converting Bitcoin into real money can be seen as the same as converting your money at an airport when you arrive in a new country. But, in this process, you are selling your Bitcoin and getting an equal amount of fiat in dollars (or your chosen currency).
But, there’s a caveat here. The ‘exchange rate’ for this exchange does not depend on the country’s central bank or government’s economic actions. It is dependent on the demand. The number of people willing to buy Bitcoin and the price they are willing to pay to get a Bitcoin determines how much money you’ll receive for your Bitcoin.
It is like exchanging currency, but the lack of government control makes the exchange process more private. It is not led by world economic structures. With that out of the way, let’s get to the crux of this guide, how to convert Bitcoin into real money? Let’s take a look at some of the methods.
1. Cash-Out Methods
There are two main ways you can convert Bitcoin into each and transfer it into your bank account. The first one is to use third-party exchange brokers including Bitcoin debit cards and ATMs, which exchange your Bitcoin for cash at any given rate. It is highly secure and simple.
The second one is to use peer-to-peer transactions to sell your token. This process is anonymous and quite fast as you are selling your coin to another person. Read on as we discuss peer-to-peer transactions later in this article. First, let’s talk about their-party broker exchanges.
2. Third-Party Broker Exchanges
In simple terms, third-party broker exchanges are cryptocurrency exchanges. As mentioned earlier, this process is the same as exchanging currency at an airport. You start by depositing your Bitcoin into the exchange and once the exchange receives your Bitcoin, you withdraw it into the currency of your choice. The withdrawal amount is directly transferred into your bank account.
Crypto exchanges have to follow strict money laundering laws and therefore, you will receive money in the same bank account that you used to deposit. This process is secure, simple, and easy, but it is a slow process. It may take up to 4-6 days for the money to reach your bank account. However, it may vary based on your country and the bank may also charge some fees based on the country in which your bank is situated.
Bitcoin Debit Cards and ATMs function the same as third-party brokers. In these cases, you have to create an account on crypto exchanges such as Kraken or Coinbase that allow you to sell your Bitcoin and withdraw physical cash. The only drawback is the high transaction fees.
3. Bitcoin ATMs
Bitcoin ATMs or crypto ATMs are not like traditional ATMs where you withdraw money from your bank account. Crypto ATMs are physical centers that allow you to purchase or sell Bitcoins or other cryptocurrencies with fiat money. There are almost 5,000 crypto ATMs across 80 countries. To find the nearest crypto ATM, you can use the Coin ATM Radar website. It is important to note that all crypto ATM machines are different and they have deposit and withdrawal limits and can only be used for small transactions. The ATMs charge a high transaction fee of 7-12 percent.
4. Bitcoin Debit Cards
Several exchanges offer a prepaid debit card that allows you to sell Bitcoin. These cards are powered by either Mastercard or VISA, meaning that they work for both offline and online shopping. Aside from shopping, you can use these cards to withdraw cash from any ATM where Mastercard or VISA are accepted.
5. Peer-to-Peer Transactions
As mentioned earlier, crypto exchanges are great for converting Bitcoin into real money, but they are slow. This is where the peer-to-peer transaction method shines as it is anonymous and fast. While selling your Bitcoin, you can choose which payment method buyers have to use to pay you. This leads to faster transactions with lower transaction fees. More importantly, you can get a better exchange rate with peer-to-peer platforms as compared to third-party brokers.
You can also ask the buyer to deposit the money directly into your bank account or even in your PayPal account. However, always ask for payment confirmation before releasing your Bitcoins to the buyer.
If done correctly, peer-to-peer selling is safe. It is crucial to be aware of the fraudsters. To be extra safe, use a peer-to-peer platform that allows you to keep your tokens locked until the payment is confirmed and received from the buyer. Here’s how to convert Bitcoin into real money using a peer-to-peer exchange:
- Choose a peer-to-peer exchange platform.
- Create an account and select the location of your ideal buyer
- Find buyers using the marketplace, and send a trade request
- The majority of peer-to-peer platforms offer an escrow option where the Bitcoins are not sent to the buyer until the payment is confirmed and received.
Some peer-to-peer platforms offer an advertisement feature where you advertise your coins. This increases your chances of finding a buyer but there’s a fee involved. You can also leave feedback for the seller of the buyer like eBay. This helps the seller as in you remain safe while choosing a buyer. Even though peer-to-peer platforms allow you to stay anonymous, you can use a VPN to secure your connection and pick payment methods. Let’s take an example:
- Dave wants to buy Bitcoin and he seeks sellers in this country. Dave sees that Now is selling Bitcoin at a reasonable price and he accepts bank transfers as well.
- Dave sends a request for the Bitcoin and Joe accepts.
- Joe puts this coin in the escrow, which holds the coin until Dave makes the payment.
- Dave transfers the amount to Joe’s bank account
- When Joe receives the payment, he releases his Bitcoin and it is sent to Dave’s account. Simple.
LocalBitcoins is a peer-to-peer platform that has more than a million users across 249 countries. It offers a great amount of security with its escrow service. It is also free to use until you choose to advertise your Bitcoin, where a small fee is charged.
Things To Keep in Mind while Converting Bitcoin Into Real Money
Converting your Bitcoin into cash is a fairly simple process but before you start the process there are certain things to keep in mind. Here they are:
- Taxes: Taxes are unavoidable, even for crypto investors. Even though some governments have not yet clarified their stance on crypto and taxes, many tax collection agencies say that users have to pay taxes on profits made by selling crypto. Whenever you are converting Bitcoin to cash, you are essentially selling the token to get cash in return. So, every time you are out to convert your Bitcoin to cash, you are liable to pay taxes. If you think you can avoid paying taxes, remember that crypto exchanges report your profits to tax authorities every year.
- Fees: Every method mentioned above that converts Bitcoin into cash entails a fee. Crypto exchanges and even crypto ATMs charge a fee.
- Speed: Third-party brokers are simple and safe but take around 4-6 days before the money hits your bank account. Peer-to-peer and Crypto ATMs are faster methods.
When you cash out your Bitcoin, consider the fees as the cost of ease of cashing out. The crypto space is evolving day by day and the cashing out methods will increase as time passes and cryptocurrencies are accepted throughout the world.