Bitcoin (BTC) has come a long way from a practically worthless cryptocurrency at the beginning of the 2010s to a nearly 60,000 USD per coin net worth today. It is the most popular cryptocurrency on the market, alongside Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Ripple (XRP), and other currencies.
People who were enthusiastic enough to buy a bunch of bitcoins when the cryptocurrency first appeared, or to participate in the Bitcoin blockchain and mine them right away, are now sitting on seriously large sums of money. There are also many people who have mastered cryptocurrency trading on crypto exchange platforms and managed to obtain considerable amounts of Bitcoin through trading.
While Bitcoin is a digital asset, it’s also exchangeable for fiat currencies such as US dollars (USD) or Euros (EUR). The process of exchanging BTC for fiat currency is called cashing out because you are exiting the crypto market and converting your funds into standard, government-issued currency.
In this guide, we’ll take a look at the things you need to consider when cashing out large amounts of bitcoins and which methods are at your disposal.
What You Need to Consider When Cashing Out Bitcoins
People that deal with bitcoins on a daily basis tend to cash out different amounts of their BTC in order to pay for their everyday expenses or to invest in anything from personal tech devices, clothes, traveling, and cars, all the way to buying real estate and funding their own companies. When it comes to cashing out smaller amounts of bitcoins, worth from a couple of hundred to a couple of thousand USD, the process is simple.
But what happens if you are one of those individuals we mentioned, if you happen to have a few hundred bitcoins in your crypto wallet and wish to convert Bitcoin into fiat money for some serious investments?
In this case, things tend to get a bit complicated, since you can’t just exchange a million dollars worth of bitcoins to fiat currency and have them wired over to your bank account, ready for spending.
Withdrawing large amounts of BTC is a serious financial endeavor and needs to be approached carefully. You don’t want to have any unpleasant surprises. These are the main factors you should take into consideration when cashing out bitcoins.
Crypto Exchange Withdrawal Limits
When cashing out smaller amounts of Bitcoin, let’s say a few thousand dollars, you usually don’t have to worry about the withdrawal limits of cryptocurrency exchange websites. The most popular crypto exchanges have a high trust rate by users and thus are great for trading digital assets, but also for cashing out. You just need to pay attention to the withdrawal limits.
The exchanges typically have a daily withdrawal limit which can be anywhere from a few thousand dollars to tens or even hundreds of thousands of dollars.
Luckily, if you are a big earner and want to cash out your bitcoins, crypto exchanges offer the possibility of increasing your daily withdrawal limit by upgrading your user account, thus allowing you to withdraw more funds at once.
This is one of the most complex factors you need to think about when cashing out loads of bitcoins. Cryptocurrencies aren’t subject to the law of any government while you’re mining them or trading them on crypto exchanges, but the moment you decide to convert them into fiat money, things change. Each and every wire transfer, ATM cash out, or bank account transfer is under the legal jurisdiction of the country where the money is being cashed. There are a series of laws and regulations that govern money transfers, defining taxes.
What you need to be prepared for is that you will have to pay high taxes when cashing out large amounts of bitcoins. This is how it goes in the modern monetary system, you can’t withdraw a lot of money and pay low taxes, and you really shouldn’t try to evade taxes or cash out funds in any illegal way since money laundering and tax evasion are serious crimes that will surely get you in trouble.
When it comes to taxes on Bitcoin cashouts, the best thing you can do is consult an accountant or lawyer who specializes in cryptocurrency taxes. Tax laws largely differ from country to country and a large cash-out does require planning since you want to choose the best option and get the lowest possible tax fees on your transfer. Of course, these specialized experts will charge you for their services, but in the end, you will be more than content with paying them a modest fee while knowing you managed to pay a lower tax and access more of your funds with their help.
Things with banks and cryptocurrency cash-outs can often get complicated. It all depends on the bank you wish to withdraw your funds to. With an increasing number of transfers from cryptocurrency exchanges and brokers to bank accounts, more banks are becoming open to working with such transfers.
If it’s your first time cashing out a large number of bitcoins, the best thing to do is to check the bank transfer policy in detail and inform yourself about the potential difficulties your bank might pose.
For example, some banks refuse to deal with cryptocurrency transfers in any way, and it would be an enormous problem if you sent several hundred thousand dollars of converted bitcoins to a bank account that denies the transfer. And even if they do accept this sort of transfer, it isn’t uncommon for banks to freeze client accounts that suddenly receive large amounts of money, especially if these accounts were accustomed to receiving regular, small amounts of funds monthly.
From a legal aspect, a large bank transfer is an immediate cause for suspicion. If the bank decides to freeze your account until the source of the money is cleared as legal, and the management is assured that it isn’t some kind of money laundering or fraud, you can lose precious time, which can sometimes mean days or even longer. Not to mention that providing the source of the funds can be very complicated for money that comes from cryptocurrencies because of the layers of privacy and security that protect user transfer data when dealing with bitcoins, which means you will have a lot of explaining to do before you can access your money.
If your bank does allow transfers that originate from bitcoins, then it’s a great idea to warn the bank officials in advance that you will be receiving a large transfer and to explain the nature of the transaction.
Break the Total Amount of Bitcoin Into Smaller Batches
When you have sorted out all the above-stated factors, you are ready to start transferring your bitcoins and cashing out. Still, it isn’t advisable to finish everything in one transaction. For security reasons, it is best to break the total amount of BTC into smaller batches, in case something goes wrong during the transfer. Sometimes, there can be problems with the crypto exchange networks, the bank may freeze your transaction to require further information, or even a cyber-attack by hackers may cause you headaches.
This is why it’s a good idea to withdraw smaller portions of the total desired amount and many people even recommend the use of different payment methods to cash out bitcoins, in case there is a problem with some of the transfers. You can lower the risk of your funds being endangered by diversifying your cash-out methods, rather than transferring everything at once.
Best Options When You Want to Cash Out Bitcoin
There are several popular ways to facilitate the bitcoin cash-out process, depending on your preferences, legal advice, and the amount you want to transfer. Before you can withdraw money from your Bitcoin wallet to your bank account and use these funds with your debit card, or send them to your PayPal or Escrow account, you need to decide how to handle the cash-out of funds first.
Cryptocurrency Exchange Platforms Like Coinbase
One of the most commonly used methods to sell bitcoins and convert them into fiat currency is through a cryptocurrency exchange platform. All you have to do is connect your bank account to your exchange account on a platform like Coinbase, and you can start withdrawing bitcoins.
Exchanging your BTC on such websites comes with fees, but it’s a pretty secure way for cashing out bitcoins, especially on well-known platforms trusted by users.
Coinbase is easy to use for transferring smaller amounts of bitcoins, but it’s also a great platform for cashing out larger sums. All you have to do is upgrade your account to Coinbase Pro and you can exchange all the bitcoins you want for fiat currency.
The platform charges an initial transfer fee based on the current spread and another one that is formed according to the amount of funds you wish to withdraw. You will see the precise fee in fiat currency before the transaction is initiated. It’s always good to check withdrawal fees in advance so that you don’t have any unpleasant surprises. With Coinbase, you can transfer multimillion-dollar sums easily.
Over-The-Counter (OTC) Desks such as Kraken’s
Another popular option for cashing out large amounts of BTC are over-the-counter (OTC) brokers or OTC desks. OTC refers to companies or individuals that deal with cryptocurrency transactions and withdrawals independently of exchange platforms.
These brokers specialize in facilitating transfers and withdrawals of large amounts of bitcoins. Multimillion-dollar transfers are nothing new to them. One of the main benefits of cashing out with the help of OTC brokers is that you can negotiate a fixed price for buying fiat currency, so the exchange price doesn’t rise while converting your bitcoins because you are buying from cheap sellers first and then from the more expensive ones.
Kraken, one of the most popular crypto exchange platforms, has its own desk with specialized OTC services for withdrawing large amounts of assets. The platform provides top-quality one-on-one OTC broker services in order to tailor each transaction according to your needs. If you become a frequent high-volume bitcoin trader, the platform also provides you with a personal account manager.
A peer-to-peer exchange is the same as OTC since it operates independently of trading platforms (with a few exceptions like Kraken or even Binance) but this type of trade doesn’t have to be executed through a professional OTC broker. Peer-to-peer exchanges are basically types of online marketplaces where individuals can trade crypto assets with each other directly and on their own terms. LocalBitcoins is a good example of a website that facilitates peer-to-peer cashouts of bitcoins.
This can be a very risky way for cashing out large sums of BTC, but it can also be a good opportunity to strike a lucrative deal. If you get in contact with someone who wants to cash out your bitcoins on a peer-to-peer exchange, you should check their background in detail, and only accept this kind of deal if you are certain that it’s legit. A lawyer or accountant specialized in crypto transfers can be of much help. Also, these specialists are likely to know some trusted individuals that deal in peer-to-peer exchanges and they are a good starting point for finding such exchange partners.
Bitcoin ATMs are another option for cashing out BTC. Although they are a great option for buying bitcoins, when it comes to cashing out they have lower daily limits, usually between $3,500-$5,000, so they aren’t really the best for cashing out large sums, but you should keep them in mind as an additional payout method.
A Few Words Before You Go…
Bitcoin is the most valuable digital currency today and cashing out huge amounts of it isn’t something you decide on in a rush. As you can see, there are various ways to carry out the withdrawal, and there are factors that require serious planning before you can start exchanging BTC to fiat currency and moving it to your bank account. The best piece of advice is not to make rash decisions in situations like these and to take your time to learn all the angles of Bitcoin cash-outs in advance.