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Withdrawing your bitcoin investments into fiat currency secures your profits. Click through to learn how to convert bitcoin to cash and what the best way to do it is. If you’re a bitcoin investor, you’re probably wondering how to cash out your investment profits.

Can you convert bitcoin to cash? If so, how? Read on to learn the best ways to turn bitcoin back into fiat currency.

Why convert Bitcoin to cash?

You usually convert bitcoin to cash when you want to secure your investment gains. Bitcoin’s value tends to fluctuate, so converting your gains into cash secures its value because fiat currencies tend to be more stable. Securing your profits is especially important if you’re risk-averse and don’t want to deal with price uncertainties.

Another reason to convert bitcoin to cash is to use it to buy things. While bitcoin was originally meant to replace fiat currencies, not many businesses accept bitcoin as payment despite rising interest. Fortunately, bitcoin is liquid enough to convert into cash almost instantly.

What you need to convert bitcoin to cash

Here’s what you need if you want to convert bitcoin to cash:

• A bitcoin wallet
• Some bitcoin to cash out
• A bank account
• An account on a third-party broker exchange or peer-to-peer exchange platform

How to convert bitcoin to cash

You have many options to exchange bitcoin for cash. Here, we cover the most common methods and provide step-by-step guides to do so:

Cryptocurrency exchanges

Cryptocurrency exchanges like Coinbase, Kraken, and Binance allow you to buy and sell bitcoin. Here’s how to cash out your bitcoin on crypto exchanges, assuming you have an external bitcoin wallet:

1. Create an account on the exchange.
2. Go through the verification process.
3. Connect your crypto wallet.
4. Transfer your bitcoin into the exchange account.
5. Choose a trading pair with your local currency.
6. Sell your bitcoin and receive your fiat currency.
7. Withdraw the fiat into your bank account.

Selling bitcoin on crypto exchanges is often the easiest way to cash out your crypto earnings. However, the withdrawal process to your bank may take a couple of days.

Peer-to-peer exchanges

Peer-to-peer platforms like Binance P2P or Paxful pair you (as a seller) with another user (acting as a buyer). As the seller, you get to set the payment methods and pick a buyer who offers the best exchange rate. 

Here’s a quick guide to selling bitcoin on peer-to-peer platforms:

1. Create a peer-to-peer exchange account.
2. Set purchase requirements like payment methods, currency, and location.
3. Look through the available buy offers.
4. Find the offer that suits your needs.
5. Review the buyer’s profile and verify their trustworthiness.
6. Choose a buyer and discuss trade terms in the private exchange chat.
7. Send your bitcoin to the exchange’s escrow and wait for the buyer to send the money.
8. Finish the trade and receive the money from your buyer.

You can sometimes get better rates from a peer-to-peer exchange, but you must also watch for fraudsters. Choose a peer-to-peer exchange that keeps your bitcoin secure until you receive payment, and always review the buyer’s rating before initiating a sale.

Bitcoin ATMs

Bitcoin ATMs work similarly to their traditional counterparts, allowing you to buy and sell bitcoin in exchange for cash.

Here’s how to cash out bitcoins on ATMs:

1. Find the nearest Bitcoin ATM.
2. Select the bitcoin exchange option.
3. Read and accept the terms and conditions.
4. Select the transaction cash limit. You may need to create an account first to make transactions above a certain value.
5. Enter your phone number.
6. Enter your withdrawal amount.
7. Scan the QR code printout with your bitcoin wallet app.
8. Wait for the peer-to-peer transaction confirmation.
9. Redeem your transaction receipt for your cash.

Bitcoin ATMs let you receive instant cash and are best for converting small amounts. However, they have higher withdrawal fees and there may not be a Bitcoin ATM near you.

Bitcoin debit cards

Several crypto exchanges like Coinbase and Binance offer Visa debit cards. You can preload these cards with bitcoin and use them to make purchases from shops that don’t accept crypto – they automatically convert your stored bitcoin into the relevant fiat currency. Additionally, bitcoin debit cards enable you to withdraw cash from ATMs.

Here’s how to set a bitcoin debit card up:

1. Sign up for a crypto exchange account.
2. Go through identity verification.
3. Navigate to the debit card page.
4. Fill out the card application form.
5. Wait for your application approval.

Once your application is approved, you can use the card from your crypto exchange app. Most bitcoin debit card providers send the card within two weeks of your application approval.

While bitcoin debit cards are highly convenient, they’re usually only available in regions like the United States or Europe. People in other regions need to wait until crypto exchanges expand their support.

Bank-account transfers

Payment platforms like Revolut, PayPal, and Cash App provide a simple way to convert Bitcoin into fiat currency and withdraw it directly to your bank account. 

Here’s how to use these services:

• 1. Sign up for a service such as Revolut, PayPal, or Cash App.
• 2. Go through the verification process.
• 3. Connect your bank account or debit card to the service.
• 4. Go to the cryptocurrency section of the platform, select Bitcoin, and convert it into your preferred fiat currency. 
• 5. Once the conversion is complete, request a withdrawal to transfer the fiat funds to your bank account. 

While these platforms are super convenient and often offer quick bank transfers, like instant or same-day options, they may come with higher fees. You may also face regional restrictions on access, and withdrawal limits could vary depending on both your account and location.

Lightning Network wallets with fiat plugins 

El Salvador was the first country to make Bitcoin legal tender and promote the use of the Lightning Network, a Layer 2 solution that enables fast, low-cost transactions. Today, the Lightning Network remains a popular way to convert Bitcoin into cash. 

To use it follow these steps:

1. Download a Lightning-enabled wallet (such as Strike).
2. Deposit Bitcoin from your regular wallet or exchange to your Strike wallet.
3. Convert Bitcoin to fiat using Strike.
4. Withdraw fiat to your bank account or use a linked debit card.

While the Lightning Network is a convenient way to cash out bitcoin, it does have some downsides, like limited merchant support, dependence on certain services for conversion, and possible liquidity problems.

Stablecoin swapping via L2s

A more complex way to convert Bitcoin into cash via Layer 2 solutions like the Lightning Network (or Optimistic Rollups) is stablecoin swapping.

Choose a platform or a wallet that supports L2, such as Strike for the Lightning Network. Transfer your Bitcoin from your regular wallet or exchange to the selected platform or wallet. Once your bitcoin is in the L2 wallet, swap it for a stablecoin like USDT or USDC using the platform’s exchange functionality or via decentralized exchanges (DEX). 

To convert the stablecoin into fiat currency, use an exchange that supports stablecoin-to-fiat conversion, such as Binance or Coinbase.

DEX-to-fiat bridges

Another popular way to turn Bitcoin into cash is by using DEX-to-fiat bridges. The idea is simple: first, you swap your Bitcoin (or wrapped BTC) for stablecoins using a DEX. Then, you connect your wallet to a fiat bridge service, such as Ramp, MoonPay, or Transak, to convert the stablecoin into fiat and send it  to your bank account or card.

Things to consider when converting crypto into cash

Choosing the right crypto asset withdrawal method is only one part of converting crypto to cash. Here are five other things to consider when converting crypto to cash:

Exchange fees

While almost all withdrawal methods have transaction fees, some are more expensive than others. For example, Bitcoin ATMs charge 10-20% on average, while Coinbase takes just 1%. Pay attention to withdrawal fees, especially if you’re cashing out a lot of money – it may put a sizable dent in your wallet.

Withdrawal limits

Because of regulations, crypto exchanges tend to limit how much money you can withdraw in a certain time period. For example, LocalBitcoins limit your trades to 200,000 euros per year, while other exchanges may impose daily or weekly trading limits. 

If you have a lot of money invested in crypto, choose a platform with high withdrawal ceilings.

Withdrawal times

Some withdrawal methods like ATMs and bitcoin retail shops are instant, allowing you to receive cash immediately. In contrast, withdrawing cash from third-party brokerages may take a couple of days. If you need cash quickly, use faster methods.

Taxes

Depending on where you live, capital gains from digital currency sales may be taxable, similar to stocks. While most small traders won’t have to worry about this, large investors must report these gains.

Rules and regulations

Bitcoin is used to transfer a lot of money quickly. If you do large transactions often, banks may become suspicious, flag your accounts, and investigate possible money laundering activities. Even if you can prove your innocence, your bank account may be blocked for a while during the investigation.

Conclusion

Generally, people convert digital coins into cash to secure their value and buy things. There are many ways to do so, like Bitcoin ATMs, crypto marketplaces, and peer-to-peer exchanges. You must consider withdrawal speed, transaction fees, and local regulations to choose the right crypto withdrawal method.

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