Converting Cryptocurrency to Fiat Currency

Cryptocurrencies exist purely as digital financial assets. You cannot touch them. You cannot hold them. Instead, you just have some numbers moving up and down on your screen and, from time to time, a record of transactions to prove your ownership of them. Those numbers are determined by the free market force of demand-supply dynamics. If more people are demanding a particular cryptocurrency that you have in your portfolio at a time, its price will rise and those numbers will also increase. The contrary is the case when its supply far outstrips its demand. In such a case, its price drops, and the numbers on your screen also come down.

Converting Cryptocurrencies to Cash (Source: medium.com)

However, there are times you will want to convert your cryptocurrencies into a fiat currency such as the USD that you can touch and hold in your hands. Yes, cryptocurrencies can make you rich, sure, but you need to learn how to convert your digital wealth into physical cash. Here, we will teach you exactly that.  

 How to Convert Cryptocurrencies to Cash

  • Using a Centralized Exchange: An exchange is an online website that links buyers and sellers of cryptocurrencies together. A “cashout” exchange is the most commonly used method to convert your cryptocurrencies into cash. Being, at least, subjected to some regulations, unlike peer-to-peer networks, it is also one of the safest. All you need to do is to place an ask order, wait to see it fulfilled, and then you can withdraw the fiat equivalent of the price at which you sold minus some fees into your account. Bitstamp, Bithumb, Bittrex, Bitfinex, Poloniex, OKCoin, Coinbase, eToro, CEX.io, and Kraken are some of the best-centralized exchanges around. However, you can also use any other besides any of these as long as its services are trustworthy and affordable. Preferably, ensure to choose one that does not have any limit on withdrawal amounts.

Bear in mind that centralized exchanges come with restrictions such as the presence of intermediaries, susceptibility to loss of funds through hacking and other forms of theft, and an intermittent lack of liquidity. Also, in case anything happens to your account on the exchange, you may not be able to access your portfolio again. 

  • Peer-to-Peer: Perhaps, in the cryptocurrency market, there is no arrangement that perfectly demonstrates free market dynamics as much as peer-to-peer transactions do. A peer-to-peer (P2P) cryptocurrency service is a decentralized exchange that circumvents the restrictions of centralized ones. In peer-to-peer transactions, users directly connect. There are no intermediaries. When you want to buy Bitcoin or any other cryptocurrency from another user on a peer-to-peer exchange, you get your coin and make a direct bank transfer to them in return.  

P2P cryptocurrency transactions are flexible, private, anonymous, fast and cheap as they are not charged. However, on peer-to-peer networks, unfulfilled transactions can be hard, if not impossible, to reverse. Also, their lack of regulation exposes users to the risk of being scammed. Popular peer-peer cryptocurrency exchange services include Remitano, Airtm, LocalBitcoins, Hodl Hodl, LocalCoinSwap, and Paxful. Binance offers both centralized and decentralized exchange services.
Face-to-Face: Although unconventional, cryptocurrencies can also be converted to fiat currency face to face at “Bitcoin markets.” At those places, cryptocurrency traders and enthusiasts can physically meet to exchange their digital currencies and get paid with hard cash. Perhaps, this is the most lucrative of all because you can level a premium price on your coins that you want to sell while also adding extraneous fees for your travel or inconvenience. However, there are risks. Such transactions can go south and as a buyer, you cannot initiate a chargeback.

The information on this website and all associated literature are for educational and informational purposes. It does not constitute a fiduciary duty or obligation between Uncut Lab and you. Please consult your financial and investment professional for your specific situation.

author

Lucas

I am the Uncut Lab resident cloud computing junkie. I help curate the written content in our Education Corner, providing engaging articles on foundational concepts in cloud computing, data analytics, machine learning, and blockchain technology. Feel free to reach out to me with questions or topics that you would like us to cover. Thanks!

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