If you’ve gone through the process of buying Bitcoin, you know how lengthy the process can be. So, why sell?
Well, there are plenty of reasons. You could be up on your investments and are looking to take out some profit, or perhaps you want to switch to a different cryptocurrency like Ethereum or even a stable coin.
Whatever your position, this guide will address the common beginner questions that are asked when it comes to selling crypto. So let’s get started.
Using a Cryptocurrency Exchange
If you’re unfamiliar with how to buy bitcoin, our guide explains everything you need to know about using and setting up an exchange account.
Once done, you can offload your Bitcoin by creating a sell order. This means your coins can be sold at the current market rate. It is common for exchanges to offer a sell limit so that you don’t sell below a specific price should it drop.
Once the order has been filled, the fiat currency will either be transferred directly to the bank account linked to your exchange account or through whatever payment method you had previously set up to buy. Remember that withdrawal fees will vary; exchanges like Binance and Coinbase have different fee structures.
Overall, exchanges offer a great all-in-one solution for buying, selling and trading Bitcoin. However, they do have some drawbacks.
Limited by location
Options for selling Bitcoin on an exchange can be limited as laws vary from country to country. In some states, it’s illegal to sell bitcoin, so check that you’re trading within regulations.
Exchanges Hold the Keys to Your Coins
Selling BTC through a custodial platform means they are managing the funds in your wallet. It’s in your best interest to be the only person able to access your crypto. For more information on practicing safe storage, and how to get your crypto wallet, head to our guide.
Requires Identity Verification
Why do centralized exchanges need your identity for you to sell BTC? You must comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations when transacting through a regulated business. Compliance requires information such as proof of identity and proof of address from the customer.
There’s no overlooking the fact that exchanges are crucial for cryptocurrency adoption. The convenience they offer investors is second to none, and the case is no different when it comes to selling bitcoin. Easy to use and fast to process.
Guaranteed Sell Price
Exchanges allow you the option of placing a sell order. This means you can choose a price you are happy to sell at, and your order gets filled when the market price reaches it. When trading through peer-to-peer platforms, you often have to wait for your order to be filled.
High Trading Volume
A higher trading volume means the spread is much tighter, so you are likely to sell at the current market rate.
Selling Cryptocurrency Directly Peer to Peer
Another option to consider is selling directly peer to peer. There are various specialized platforms online that allow you to facilitate P2P transactions. Their sole purpose is to enable you to trade bitcoin for cash with another seller/buyer.
You must post a listing on the platform stating your desired price and payment option as a seller. If a buyer decides they want to purchase your BTC, the platform typically provides an escrow account, allowing a form of security for the transaction of assets. Once both parties agree the payment has been made, the funds are transferred.
However, similar to exchanges, selling P2P carries its risks.
Identity Verification Is Not Required
Commonly, online peer-to-peer platforms don’t require your identity. Some traders who highly value data security choose this route based on that reason alone.
Fewer transfers of funds are needed when selling P2P as you don’t necessarily have to fund and withdraw from your account. Payments can be settled in multiple ways with various payment apps using a credit card or PayPal.
Unlike exchanges, you have to manually list and negotiate your sell orders which makes the process far from smooth as you are waiting for buyers to take an interest in your listing.
Higher Risk of Fraud
As anonymity is possible on these platforms, they become more prone to fraud. They are regularly smaller platforms than exchanges and, consequently, have less security in general. It is worth reading reviews on P2P platforms to get a good idea of the security measures and features they have in place.
You can also sell your Bitcoin in person, either for cash or as a form of exchange if you’re purchasing an item. However, the threats of dealing face to face are apparent. You are vulnerable to physically being threatened, so you should only do this with a highly trusted buyer.
Selling Into Stable Coin
If you’re not looking to sell your Bitcoin for fiat currency, another option is to sell to a stable coin such as USDT or USDC. There can be a few reasons you may choose to do this as it presents some benefits.
If you think the market is on the way down, by selling your holdings to stablecoins and not fiat, you won’t have to handle any withdrawal fees on the exchange.
Moving constantly between fiat and cryptocurrency can be expensive, especially if you frequently trade. Stable coins offer a great solution if you wish to keep your funds on the blockchain and not be exposed to price volatility.
Will there be fees involved?
Yes, an exchange’s fees will vary depending on the platform, and there will also be fees for peer-to-peer trading.
Some fees typically depend on your chosen payment/withdrawal method. Using a credit card through an exchange typically draws quite hefty fees. The costs you need to look out for are fund transfer fees when making a bank transfer, ‘maker’ and ‘taker’ fees and set transaction fees.
Maker and taker fees are charged to the two parties participating in the transaction, the seller (maker) and the buyer (taker). Generally, the makers pay less as they are the ones creating the market on the exchange.
P2P platforms charge fees for the luxury of being able to sell without complying with KYC. However, many of the services available will still require information from you as a seller. You’ll need to provide an email for your profile and bank account to wire transfer the funds.
Is selling Bitcoin a taxable event?
Yes, and it’s essential to consider it when making trades. Our tax regulations page offers a comprehensive breakdown of common tax questions.
If I trade to another crypto, will that be taxed?
Yes, any transaction you make with crypto or to any digital asset is a taxable event. If you’re worried you may be liable for tax, our tax calculator is the perfect tool to stay on top of your trades.
Can I spend it in shops?
Yes. While they are few and far between, retail companies accepting cryptocurrency are becoming increasingly common. Although, we are far from being able to pop down to the shops to grab some milk with our Bitcoin.
While using a crypto exchange can be straightforward and peer-to-peer trades can use less data, both processes will involve fees. Due to the sheer number of platforms and their varying costs, you will have to figure out which method aligns most with your values.
Most importantly, it is essential to familiarize yourself with the potential pitfalls when selling Bitcoin. We are still early in the grand scheme of cryptocurrency adoption, and scamming is rife across the industry. As time passes, staying educated is increasingly more important to ensure you’re trading safely!