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December 13, 2023

How to convert your bitcoins into FIAT?

Converting your cryptocurrencies into fiat currencies today is an easy task. Indeed, a multitude of platforms offer this service, including our Lyzi solution.

What is Bitcoin?

Bitcoin is a digital currency, also known as cryptocurrency. There is no physical bitcoin; instead, there are only digital data stored on the blockchain. This means it is a form of secure currency without any government control.

The Bitcoin source code specifies that there will only ever be 21 million bitcoins produced. This limited supply is also what gives bitcoins their value. As the demand for bitcoins increases, it is possible to exchange one bitcoin for more money or services. In this way, Bitcoin has become a tradable store of value, much like gold.

Why Convert Cryptocurrencies to Fiat Currencies?

The ultimate idea is for Bitcoin to replace traditional currencies. People are currently investing in Bitcoin because they consider it a commodity whose value will increase over time. If you own bitcoins, you may want to hold onto them for this reason. However, since demand has recently increased, you could realize a profit if you "sell" your bitcoin now and transfer the same value to your bank account.

In theory, you may one day use Bitcoin for all types of transactions. For now, there are still few businesses or individuals that accept Bitcoin payments. This is one of the reasons you might want to convert your bitcoins into cash, to use the value of your bitcoins to buy real things. It's important to note that Bitcoin is not the only cryptocurrency you can invest in; we invite you to check out our advice on the top 12 cryptocurrencies to buy in 2022. Now, let's see how to convert your cryptocurrencies (specifically Bitcoin) into fiat currencies.

How to Transfer Bitcoins to a Bank Account?

Transferring bitcoins to a bank account is a similar process to exchanging currencies at the airport when arriving in a new country. Essentially, it involves "selling" your bitcoins and "buying" the same value in dollars (or your chosen currency).

The "exchange rate" for this currency exchange is not determined by the economic actions of a government or central bank. Instead, the Bitcoin exchange rate is determined by demand. The number of people wanting to buy bitcoins at any given time and what they're willing to offer determine the amount you'll get for your bitcoins.

Transferring bitcoins to a bank account is essentially a currency exchange. But since Bitcoin lacks government control, the exchange process happens privately and isn't influenced by global economic structures.

Considerations for Cashing Out Bitcoins

Before converting all your bitcoins into cash, consider the following pitfalls:

Taxes - If you make a profit by selling your bitcoins, you'll need to pay income taxes on your gains. Keep this in mind when planning your tax year. Any reputable third-party exchange broker will report transactions for tax purposes.

Fees - Most methods of converting bitcoins to bank accounts involve exchange fees.

Speed - Exchanges between third-party brokers can take a few days to transfer money to your bank account.

Withdrawal Methods

There are two main methods to convert bitcoins into cash and transfer them to a bank account. Firstly, you can use a third-party exchange broker. These third parties (including Bitcoin ATMs and debit cards) will exchange your bitcoins for cash at a given rate. It's simple and safe. Alternatively, you can use a peer-to-peer transaction to sell your bitcoins. This is a faster and more anonymous method, as you're selling your bitcoins directly to another person.

Third-Party Broker Exchanges

A third-party broker is another name for a cryptocurrency exchange. The process is similar to exchanging currencies at an airport in a foreign country. You deposit your bitcoin into the exchange. Once the exchange receives your bitcoin, you can request a withdrawal in your chosen currency. The withdrawal will be deposited into your bank account.

Brokers are subject to anti-money laundering laws, so you'll need to withdraw to the same bank account you used for depositing. This method is simple, easy, and secure, but it's not the fastest. The average time for the money to arrive in your account is 4 to 6 days, though this varies by country. Associated fees also depend on your bank's location.

Bitcoin ATMs and Bitcoin debit cards work similarly to third-party brokers. In both cases, you create an account allowing you to sell bitcoins and withdraw physical cash. The downside is higher transaction fees. Coinbase and Kraken are the most popular broker exchanges for buying and selling bitcoins.

Peer-to-Peer Platforms

For a faster and more anonymous method, you can use a peer-to-peer platform to sell bitcoins for cash. When selling bitcoins to other individuals, you can choose the payment method you want the buyers to use. This often allows for quicker transactions with lower fees. You may also get a better exchange rate with an individual buyer than with a third-party broker.

You can ask the buyer to deposit cash into your bank account or send you a bank transfer (PayPal can also be used). Always request proof of identity and payment before handing over your bitcoins. Peer-to-peer selling is safe if you know what you're doing. However, beware of scammers. Using a peer-to-peer platform that allows you to lock your bitcoins until you confirm receipt of payment can be helpful.

The most popular peer-to-peer platform is LocalBitcoins.

How to Cash Out Bitcoins Using a Brokerage Exchange?

Using a broker to exchange your bitcoins is also straightforward if you follow these steps:

👉 Decide on the third-party brokerage exchange you want to use. Coinbase and Kraken are popular options. It's also possible to do this on Lyzi.

👉 Sign up and complete the broker's verification process.

👉 Deposit (or buy) bitcoins into your account.

👉 Cash out your bitcoins by depositing them into your bank account or your PayPal account (applicable to some services).

👉 Remember that withdrawal times can be 4 to 6 days, and transaction fees may apply.

Convert Your Cryptocurrencies to Fiat Currencies Using a Peer-to-Peer Exchange

Most peer-to-peer platforms have an escrow option that allows you to hold onto your bitcoins until you confirm receiving payment.

Many peer-to-peer platforms allow you to create an advertisement for your bitcoins (though this method may involve additional fees). There's also a rating system, similar to eBay, that lets you leave feedback on the buyer or seller. This helps you stay safe when choosing a buyer.

Peer-to-peer platforms also allow you to remain anonymous. You can use a VPN to secure your connection and choose payment methods like web money or gift cards.

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