How to cash out Bitcoin: Methods, fees, and what to know

Many crypto investors dream of the day when Bitcoin (BTC) is as mainstream as other forms of money. But until that day arrives, crypto investors only have one option to guarantee their profits: Cash out.

Although it’s easier to swap between digital assets and dollars, there are many methods you can use to cash out. Each one has their own pros and cons, so pay attention to the differences in their speed, flexibility, and fees to find the right fit for you. And don’t forget you’ll have to consider the fee and tax implications when deciding how to cash out Bitcoin, too.

In this guide, you’ll learn the most common ways to withdraw Bitcoin and ensure your transactions are safe, seamless, and surprise-free.

Most common ways to cash out Bitcoin

“Cashing out” Bitcoin (or any other cryptocurrency) means converting it to fiat currency like USD via compatible services like crypto exchanges or peer-to-peer (P2P) platforms. It isn’t possible to convert Bitcoin to cash directly at most mainstream financial institutions, but investors still have plenty of easy ways to turn their BTC into fiat.

Withdraw crypto to a bank account

When crypto investors talk about sending Bitcoin to their bank, they usually mean selling BTC for cash on a centralized crypto exchange (CEX) and then sending the fiat to a linked bank account. Many CEXs like Coinbase offer ACH and wire transfers for convenience. However, these methods can still take a few business days to clear.

Using CEXs to cash out BTC remains popular because these platforms tend to be the most convenient method with high liquidity and competitively low fees. On the downside, there’s no way to preserve your online privacy with this method because CEXs collect personal know-your-customer (KYC) data to comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) laws, as well as the fact that your traditional financial institution links to your account.

Cash out with a debit card

Many merchants still don’t accept Bitcoin as payment directly, but crypto debit cards let anyone spend their digital assets practically anywhere. This new line of cards links to a crypto account tied to an exchange or self-custodial wallet so users can make purchases using their crypto balance. While customers are spending crypto, the card processor handles conversions so the merchant receives an equivalent amount of fiat at the latest fair market value (FMV). You can also use many of these crypto debit cards to withdraw cash at an ATM.

Crypto debit cards like the Coinbase Card often come with “crypto back” rewards with each purchase, and they’re easy to use wherever the card issuer works. However, you have to watch out for extra fees (especially conversion and ATM withdrawal fees), and rapidly changing spreads that can affect your final sale price.

P2P trades

P2P platforms were once the default way to send and receive Bitcoin. Although these websites aren’t as central to the crypto landscape today, they still offer a way to sell Bitcoin to other individuals.

On a P2P platform, you can post that you’re interested in selling Bitcoin and set the conditions for this transaction (e.g., fiat or another cryptocurrency like USD Coin (USDC) and the rate you want to sell your BTC at). If someone accepts your offer, the funds move to an escrow account and don’t move until the other party sends their payment to complete the transaction.

For traders who want greater customizability and the option for total anonymity, P2P platforms provide the most ways to adjust the parameters of your Bitcoin sale. However, these platforms don’t have the same liquidity or regulatory transparency as major exchanges, so exceptionally large cash outs aren’t as likely to happen.

Bitcoin ATMs

For anyone who wants to bypass CEXs and get cash directly, devices called “Bitcoin ATMs” let you withdraw dollars for your digital assets. After entering your wallet information into one of these machines, you’ll send the Bitcoin you want to trade for cash to a page linked to a provided QR code and wait for the transaction to clear. If everything went successfully, you’ll quickly receive an equivalent amount of cash at the current FMV.

Bitcoin ATMs are simple to use and offer significant anonymity. Since you get cash directly, there’s also no need to wait days for a bank transfer to clear or rely on intermediaries. However, Bitcoin ATMs tend to charge steep convenience fees. There are also withdrawal limits on some of these machines, making them less practical for large transactions.

5 factors to consider when cashing out crypto

Cashing out your Bitcoin isn’t as simple as picking where you want the funds deposited and clicking “sell.” Here are five of the features to study for different withdrawal methods, so you can compare their overall costs, speed, and privacy to see how they fit with your financial goals.

Transaction fees

Each withdrawal method has unique fees that reduce the total amount of fiat you receive. On exchanges, these are typically spreads, commissions, and withdrawal fees. Options like Bitcoin ATMs and crypto debit cards often come with conversion costs, but watch out for other sneaky charges, such as ATM withdrawal rates or convenience fees. P2P platforms tend to have few or no additional charges, but some platforms charge a fee for holding funds in escrow on your behalf.

Time and effort

If you want cash from your Bitcoin immediately, you’ll probably prefer methods like Bitcoin ATMs or crypto debit cards that act as physical cash equivalents. However, for those who don’t mind the wait (and a couple of extra steps), sending crypto from a CEX to a bank account or working through a P2P platform tend to cost less overall.

Market conditions

Traditional advice for Bitcoin investors is to “buy low, sell high.” Exactly how high you want Bitcoin to climb is a personal decision, but you’ll maximize your returns if you sell Bitcoin when it’s in a bull run rather than falling in a bear market. However, some serious crypto investors strategically cash out their Bitcoin at a lower price for tax-loss harvesting to reduce their yearly gains or even claim deductions.

Taxes

All crypto-to-cash transfers trigger taxable events. Selling Bitcoin for cash – even if you’re using BTC to buy goods or services directly – counts as a disposal that you need to report to the IRS as a capital gain or loss. If the price you sold BTC is higher than your initial purchase price (aka cost basis), you’ll need to pay capital gains tax.

Financial goals

Your personal financial situation plays a role in whether it’s wise to cash out your BTC. If you believe in BTC’s long-term potential and don’t need money right away, consider simply holding (aka HODLing) or selling a portion of your Bitcoin at a profit and keeping the rest as a longer-term investment. (Any crypto you hold for over a year is subject to lower taxes than cashing out short-term.) If you need liquidity or want to take risk out of your portfolio, you may want to sell a larger amount of Bitcoin sooner.

How can I convert my BTC to cash on a CEX? A step-by-step guide

Even if you’re new to crypto, it’s straightforward to swap between BTC and cash on a CEX and get the money into your bank account ASAP. Here’s how to get started:​

• Choose your exchange: If you don’t already have a CEX account, review the most popular CEXs in the crypto market. Pay extra attention to their security, transparency, and other features like what coins they support beyond BTC. Once you find an exchange that has everything you want, create a new account and submit your KYC documentation (typically a government ID) during signup.
• Transfer BTC to your exchange account: First, open the crypto wallet where you store your Bitcoin. Search for Bitcoin on your crypto exchange and find the option to “receive BTC.” When the recipient address appears, choose “send BTC” in the wallet you have open and paste the exchange’s address. After confirming the transaction, you’ll see the BTC in the exchange account once it clears on the blockchain (anywhere from a few minutes to hours).
• Create a sell order: Once the BTC is in your exchange account, find the BTC/USD pair and submit a sell order for Bitcoin. Some exchanges give you the option to close the position immediately with a market order, but you could also submit the price per Bitcoin you want to sell at with a limit order. Once your order processes, you’ll see cash in your account.
• Transfer funds: Once the USD is in your exchange account, you can send your fiat to a linked bank account via ACH or wire transfer. On some exchanges, you can even send these funds to fintech apps like PayPal.

Why can’t you always cash out crypto?

Although it’s getting easier to cash out your crypto, there are a few common complications that can limit or delay your fiat currency:

• Holding periods: Some exchanges have rules that restrict when you can swap or withdraw funds. CEXs often do this after you’ve bought crypto or deposited money to a bank account as they wait for a confirmation that the transfer completed successfully. This keeps the exchange in compliance with fraud prevention rules so you can’t spend BTC you’ve already cashed out.
• Liquidity: For a smooth transaction, there has to be enough buyers willing to pay your desired price for a digital asset. Otherwise, when you try to sell BTC, limit orders aren’t likely to fill, or you’ll experience price slippage (when there’s a mismatch between the expected and final closing price).
• Technical issues: Scheduled maintenance or blockchain congestion can delay your crypto transaction speed, regardless of exchange.
• Unlisted or unsupported assets: Crypto trading platforms don’t automatically support every altcoin – or even USDC. Anyone holding niche tokens with small market caps will likely have a tougher time finding a platform with enough liquidity.
• Market volatility: If you set limit orders to sell your Bitcoin, there’s a chance it might not fill at your desired amount if the price fluctuates too sharply. In some extreme cases, brokerages or CEXs can temporarily pause trading due to extreme volatility.

Stay organized with CoinTracker

Contemporary crypto investors have dozens of secure portals to trade between Bitcoin and fiat currencies. But whatever method you choose, there are tax implications when you sell digital assets like BTC. The IRS needs to know the cost basis and gain or loss from every transaction, whether you’re cashing out or using BTC directly from a debit card. To make collecting and reporting this data as simple as possible, CoinTracker’s Portfolio Tracker logs your transactions so you can reference everything you need for tax compliance.

Want a clear view of your assets at all times? With CoinTracker, link your wallets and exchanges to monitor your portfolio’s performance in real time. Create a free account and see why crypto investors trust us.

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.