Can you cash out your crypto?

Highlights

• Crypto, being a decentralised system of finance, is unfettered by any government or financial institution. So, the price of crypto is determined only by what people are willing to pay for it
• Converting crypto into cash is quite similar to converting one country’s currency to another through an exchange one might find at an airport
• When going the peer-to-peer route, be sure to use a platform that lets you keep all your crypto until the payment has been verified

Cryptocurrency is fast developing into a mainstream asset class along with stocks and commodities. Although volatile and risky given its lack of legislation and regulation, there’s no denying that 2021 has seen a whole bunch of people get rich from cryptos like Bitcoin, which has offered strong returns so far this year.

Although more and more places are accepting Bitcoin as payment, including El Salvador, which created history in September by becoming the first country to adopt Bitcoin as legal tender, to really reap the benefits of any profits you might gain from crypto, you need to be able to convert it to cash.

Can you cash out your crypto?

But how do you do this? Well, there are two ways: either through an exchange or through a broker.

Let’s dive in.

How Is The Crypto Exchange Rate Calculated? 

The exchange rate for crypto is determined by demand. This differs from exchanging one fiat currency for another because fiat is influenced by the respective country’s central bank and the actions of that government. Crypto, on the other hand, being a decentralised system of finance, is unfettered by any government or financial institution. So, the price of Bitcoin, for instance, is determined only by what people are willing to pay for it.

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Through an Crypto Exchange

This method of converting crypto into cash is actually quite similar to converting one country’s currency into another through an exchange one might find at an airport.

It’s pretty simple really. First you deposit your crypto into a crypto exchange. Binance and Kraken are two of the biggest exchanges, which offer conversions from a wide variety of cryptocurrencies. Other popular exchanges are Coinbase, eToro and Unocoin.

Then once the crypto exchange receives your crypto you can choose the currency you’d like to convert it to (i.e. AUD, USD etc.) The withdrawal is then paid directly into your bank account.

Things To Consider

There are a couple of things to be aware of. Firstly, you must pay taxes on any profit you’ve made while trading or investing crypto. The Australian Taxation Office has begun to really clamp down on capital gains tax incurred from cryptocurrency. How much you pay will, of course, vary given how much profit you’ve made.

The other thing to consider is it will take around four to six days for the money to be transferred from the crypto exchange into your account.

Peer-to-Peer

The peer-to-peer method of conversion is both quicker and more anonymous. First, you sign up to a peer-to-peer exchange. LocalBitcoins is a good place to visit for peer-to-peer exchanges in Australia.

Using this exchange, you can choose the location of the buyer and then use the platform to choose the buyer themselves.

When going the peer-to-peer route, be sure to use a platform that lets you keep all your crypto until the payment has been verified. This is called an escrow option and is imperative in protecting you from scammers. Unfortunately, the unregulated nature of the crypto space lends itself to scammers who will try and defraud you of your crypto. So be very careful if choosing this route.

The Bottom Line

It’s a great feeling when you’ve made a profit on a crypto trade or investment and you see that profit manifest itself in your bank account. For beginners, it’s advised that you use a crypto exchange. If you use a peer-to-peer platform, make sure to protect yourself from being fleeced. Otherwise, good luck!