How to Cash Out Crypto (Steps to Withdraw Crypto or Bitcoin)

What Does “Cashing Out Cryptocurrency” Mean?

Cryptocurrency holders eventually reach a point where they want to convert their digital assets into government backed money (fiat money). This process is known as “cashing out”. It typically consists of two main steps. Selling the crypto on an exchange and withdrawing the resulting fiat to a bank account. While it’s straightforward, the process requires navigating exchange platforms, understanding fees, timing the market, and staying compliant with regulatory requirements.

Why Do People Cash Out Crypto?

People choose to cash out their crypto for various reasons, but these can generally be grouped into three main categories:

Securing Profits

A key motivation for cashing out is locking in gains. Given the volatility of crypto markets, many investors choose to convert their holdings before potential downturns or after making profits. Cashing out can also be a defensive move to avoid making emotional decisions during periods of market uncertainty.

Real-World Use

Investors cash out to fund real-world purchases, financial obligations, or broader lifestyle. As cryptocurrencies increase in value, converting digital assets into fiat currency becomes a practical step to make gains usable outside the digital ecosystem.

While some merchants and service providers have begun accepting cryptocurrency directly, the infrastructure for widespread adoption is still developing. As a result, many individuals prefer converting to fiat for greater convenience, stability, and broader acceptance.

Tax Considerations

Tax implications are a major factor in deciding when and how to cash out cryptocurrency. In many jurisdictions, including the U.S., crypto is classified as property rather than currency. This means that selling, trading, or even using crypto for purchases can trigger taxable capital gains. Keep in mind that tax treatment varies significantly across countries.

Methods to Cash Out Cryptocurrency or Bitcoin

There are several reliable methods to convert your digital assets into traditional currency. Whether you're taking profits, need liquidity, or simply exiting the crypto space, it’s important to understand the options. This section explores the most effective ways to convert your cryptocurrency into fiat currency.

a) Using a Centralized Cryptocurrency Exchange (CEX)

CEXs are platforms that facilitate the buying, selling, and trading of cryptocurrencies. They act as intermediaries between users. Basically, they’re providing a marketplace where you can sell your crypto for fiat currency and withdraw it to your bank account.

Popular CEXs Coinbase: One of the oldest US based and user-friendly exchanges with a simple "buy/sell" button that allows quick conversion of cryptocurrency into cash.

Binance: The world's largest crypto exchange by trading volume. It offers extensive cryptocurrency options and multiple fiat withdrawal methods.

Source: Binance

Kraken: Known for its strong security measures and reliable banking relationships. It makes fiat withdrawals smooth in many regions.

Pros

• User-friendly interfaces designed for beginners and experienced traders.
• High liquidity due to large number of users, allowing for easier execution of large trades without significant price impact.
• Customer support availability for resolving issues during the cash-out process.
• Advanced trading tools and educational resources to optimize your selling strategy.
• Major bigger CEXs are operating in regulated environment that provides some level of consumer protection.

Cons

• KYC/AML requirements to provide personal information and reduces privacy.
• Security risks as centralized platforms can be targets for hackers.
• Withdrawal fees vary by significant amounts depending on the currency and amount.
• Withdrawal limits restrict how much you can cash out in a given period.

b) Using a Brokerage Account

With Brokerage Accounts, users trade digital assets through regulated platforms they already use for stocks and bonds. One of the most common ways to invest in crypto this way is through crypto ETFs. These are funds that track the price of cryptocurrencies like Bitcoin or Ethereum and trade on traditional stock exchanges. These ETFs give investors exposure to crypto price movements without the need to manage wallets or hold the actual coins.

Interactive Brokers is one of the leading platforms in this space, providing access to a range of crypto ETFs. This approach appeals to investors who want crypto exposure with the structure, security, and simplicity of traditional financial systems.

When investors want to cash out, they simply sell the ETF shares through their brokerage account. Just like they would with a stock or mutual fund. The proceeds are settled in cash and can be withdrawn or reinvested.

Pros

• Familiar interface for traditional investors already using these platforms.
• Consolidated portfolio allowing you to manage multiple asset types in one account.
• Regulated environment with established consumer protections.
• Simplified tax reporting as brokerages typically provide comprehensive tax documents.
• No need for crypto wallets or dealing with private keys and seed phrases.

Cons

• Limited cryptocurrency selection compared to dedicated crypto exchanges.
• Higher fees than some direct crypto trading options.
• Less direct control over the actual cryptocurrency assets.
• ETF expense ratios add ongoing costs, though they’re becoming more price competitive.
• Potentially longer withdrawal processes to convert to cash compared to some alternatives.

c) Peer-to-Peer (P2P)

Peer-to-peer (P2P) trading allows users to exchange cryptocurrencies directly with other individuals. P2P platforms connect buyers and sellers, often supporting various payment methods and currencies. The platform typically provides an escrow service to protect both parties during the transaction.

The process typically involves creating an account on a P2P platform, listing your cryptocurrency for sale or finding a buyer, agreeing on the terms, and completing the transaction through the platform’s system.

Popular P2P Platforms

Binance P2P: Integrated with the Binance exchange, allowing users to transfer funds from their spot wallet to the P2P wallet for selling. The platform helps match sellers with potential buyers based on their preferred payment methods and currencies.

Source: Binance P2P

Bybit P2P: ByBit’s P2P is fast-growing with a clean interface and tight integration with their spot and derivatives platforms. While it's still building reputation and liquidity compared to giants like Binance, it's a solid option for emerging market traders.

Source: Bybit P2P

Pros

• Diverse payment options including bank transfers, mobile payments, and cash.
• Support for numerous fiat currencies, making it accessible globally.
• Access in regions with limited banking infrastructure or exchange availability.

Cons

• Higher risk of scams, requiring careful verification of trading partners.
• Potential for disputes calling for resolution through platform mediators.
• Higher seller fees on some platforms.
• Longer transaction times compared to instant exchange selling.

d) Bitcoin ATMs and Exchange Offices

Bitcoin ATMs (Automated Teller Machines) and crypto Exchange Offices are physical locations that allow users to buy and sell Bitcoin and other cryptocurrencies for cash. Bitcoin ATMs work similar to traditional ATMs. They let users buy or sell cryptocurrency by selecting an option on the screen, entering the amount, and scanning a QR code to send or receive crypto. For selling, once the transaction is confirmed, the machine releases cash instantly.

Bitcoin ATMs are distributed globally, but the distribution remains uneven. Several online tools, like CoinATMRadar, and mobile apps help locate nearby Bitcoin ATMs. They show their operating hours, supported cryptocurrencies, and fee structures.

Pros

• Immediate cash access without waiting for bank transfers.
• No bank account required for cashing out cryptocurrency.
• Familiar physical interface similar to traditional ATMs.
• In some places anonymity possible for smaller transactions below KYC thresholds (typically €1,000 per transaction).

Cons

• Higher fees than most other methods.
• Geographic limitations in availability and accessibility.
• Transaction limits restricting the amount you can withdraw per day.
• ID verification required for larger transactions.
• Limited cryptocurrency support with many machines only handling Bitcoin.

e) Payment Platforms and Services

Various payment platforms and fintech services have integrated cryptocurrency payments. This allowed users to spend cryptocurrencies directly.

Crypto debit cards link to your cryptocurrency holdings and convert them to fiat currency at the point of sale. This way you can spend digital assets anywhere where traditional payment cards are accepted. Services like Revolut and PayPal have also integrated cryptocurrency buying, selling, and in some cases, spending capabilities.

Source: Revolut

Pros

• Immediate spending capability without manual conversion to fiat first.
• Wide acceptance at merchants that take regular debit/credit cards.
• Convenient mobile applications for managing transactions.
• Simplified user experience for those unfamiliar with cryptocurrency exchanges.

Cons

• Less competitive exchange rates compared to dedicated crypto platforms.
• Limited cryptocurrency selection with most services supporting only major coins.
• Regional availability restrictions based on regulations.
• Potential spending limits or account restrictions.

Before You Cash Out Crypto: Important Considerations

Tax Implications and Reporting Requirements

Most countries tax cryptocurrency gains. If you sell or trade crypto, you may have to pay capital gains tax. It’s important to report all your crypto transactions. Not reporting them can be tax evasion, which may lead to fines or even jail. Crypto is not fully anonymous, and tax agencies like the IRS can find out who owns a wallet.

Security Precautions

Keeping your crypto safe when cashing out is very important. Turn on two-factor authentication (2FA) for all your accounts. Always check the withdrawal address before you send money. Use a secure internet connection when logging into financial accounts. Before making a big withdrawal, try a small test transaction first.

Read more about it in our article - How to avoid crypto scams.

Transaction Fees and Costs

Cashing out crypto can come with different fees. Check and compare withdrawal fees on different platforms. Blockchain transactions, like with Bitcoin, may also have higher network fees. If you’re changing crypto to regular money (fiat), check the currency conversion rate. Watch out for hidden costs and markup fees.

Read more about it in our article - How to Buy Crypto Without Fees.

In the guide below, we’ll walk you through the process of cashing out using a CEX. If you’ve traded on a CEX before, the steps will be fairly straightforward.