So you’ve made some money on that bitcoin you bought months or years ago. Now, you want to convert it to cash. Follow these steps to make sure the funds hit your bank account safely.
The rise of crypto as an asset class has meant that many people are sitting on life-changing money. If you’ve managed to HODL through the market’s ups and downs, you may well find yourself in a position where you want to take some cash – and risk – off the table. Maybe pay for living expenses, a holiday, a new home, or that Mustang you always wanted.
To do that, there’s just one more stage to complete: convert some of that magical internet money into dollars, pounds or euros in your bank account. While it’s not difficult, and you shouldn’t run into any problems, you’ve come too far to make a mistake at this point.
Note: for larger investors, an OTC Service Desk can help users buy and sell crypto securely and privately.
1. Find the right exchange
First up, register with a secure, reputable exchange. If you’re cashing out to fiat, this is less of a problem than it used to be. Exchanges that offer fiat deposits and withdrawals are generally well regulated, so there’s little risk of picking one that might lose or run away with your money.
But you should also bear in mind liquidity. Even some reputable exchanges can have low trading volumes, which can make it difficult to convert larger amounts of crypto efficiently. Slippage can eat away at your profits. If in doubt, go with a popular, global option. Also important is that the exchange should support your local currency. Coinbase is great for USD, Bitstamp for EUR, and TimeX for AUD.
Note that any exchange worth trusting will require you to complete KYC (Know Your Customer) processes, often simply called account verification. On which subject...
2. Complete Verification before you deposit crypto
Identity verification is generally a legal requirement for exchanges that act as on- and off-ramps to crypto, connecting the world of bitcoin and the blockchain to the traditional financial system. You’ll typically need to submit documentation like a passport or driving licence, and sometimes proof of address, before they will let you withdraw cash to your bank account.
This process is often almost instant, but it can take a while. Sometimes, you’ll need to provide more information. And when exchanges are swamped with new users – as in a bull run – then they might have a backlog of applications to process.
It’s smart to complete verification in full before you deposit any crypto to the exchange. Otherwise, if there’s a delay, there’s the risk you might not be able to sell it on that platform – or, worse, that you might not be able to withdraw it until the problem is fixed, by which time, you might have missed the best prices.
3. Send your coins – carefully
When transferring funds to a new exchange account, start with a small amount to make sure everything is working properly. Check the minimum amount you can deposit (set by the exchange), and send that much. If the transaction goes through and the funds are credited to your account, then you can send more. While there’s no real risk of funds being stolen with a reputable exchange, your goal is to minimise delays and unnecessary interactions with customer services.
If you do need help, you won’t be expected to give out any personal data (especially information like private keys), or to make transactions to addresses other than the deposit address. If you seek help via public social media channels, like Twitter or Telegram, then bear in mind that other people can see your message. Telegram groups, in particular, can be full of fake ‘customer service’ accounts that will try to scam money out of you in one way or another.
4. Don’t Panic!
When it comes to selling, take your time to avoid making a mistake. Make sure you understand the user interface before you submit an order. Most of the time, things will be very straightforward. Many exchanges have a simple mode, which makes things easy to navigate. Others, however, are designed for experienced traders and are more complicated.
Limit orders are your friend: you can set a specific price and wait for the market to come to you, rather than placing a market order, which might settle for less than you expect. Good exchanges will tell you exactly how much money you’ll receive for your crypto before you confirm the sale.
5. Test a withdrawal to your bank
Just as you sent a test transaction to the exchange, make sure everything is working between the exchange and your bank account. Send a small amount first and wait for it to appear in your account before withdrawing a larger sum.
If you haven’t used your bank account with a crypto exchange before (and even if you have), the bank may question your withdrawals and require you to confirm their source before they release the funds. The chances of this happening are higher if you withdraw a large amount of money.
Finally, keep records of your trades for tax purposes. The information you need will be specific to your jurisdiction, so if you’re selling or trading a lot of crypto, it can be worth talking to a tax expert.