Cryptocurrencies have proven to be a popular investment in recent years, with some investors seeing massive returns depending on when they got in and got out. Buying and selling cryptocurrencies is easier today than ever but still requires a bit of technical know-how. Here are some of the ways that you can.
Selling Cryptocurrencies the Old-Fashioned Way
Cryptocurrencies run on blockchains, which are essentially secure and automatic ledgers of all transactions. Individual crypto holders have wallet addresses that can accept and send transactions. With their private key, a crypto holder can send the cryptocurrencies in their wallet to any other wallet.
In theory, you don’t need any outside help to sell your cryptocurrency for cash. You can do it the same way people sell anything else, find a buyer, accept their cash, and send the Bitcoin to a wallet of their choosing.
However, this method of selling has some clear downsides. First, you’ll need to find a specific buyer. Second, both you and the buyer will have to trust each other for the transaction to work. Finally, you could make a mistake during the transaction and lose the cryptocurrency permanently by sending it to the wrong wallet. However, there are solutions to this problem.
Putting Your Trust in Smart Contracts
A smart contract is like a program that runs on the blockchain. Because it’s on the blockchain, everyone can see it and what it does. That means that you can carefully inspect any smart contract and determine whether or not you can trust it.
To facilitate your transaction, you can set up a smart contract that will hold your cryptocurrency and release it to a specific wallet when certain conditions are met. This way, both parties can be sure that the deal is going to happen how they want it to, with no trust required.
However, this type of arrangement only really works for transactions exchanging cryptocurrencies for other cryptocurrencies. If it’s a cash transaction, you need some way to inform the smart contract that the cash has been received. In the end, you’re going to end up relying on a third-party service for this rather than the smart contract itself.
Cashing Out at a Cryptocurrency Exchange
A cryptocurrency exchange is typically the surest way to sell crypto today. These are organizations that essentially act as brokerages, buying and selling cryptocurrencies and fiat currencies from a wide range of clients. Exchanges like Binance, Coinbase, KuCoin, WhiteBIT, and more provide easy access to crypto for both buyers and sellers.
However, there are some potential downsides. Most exchanges are custodial, meaning they are the ones holding your cryptocurrencies. There’s a classic saying that goes, “not your keys, not your coins,” referring to the idea that you don’t really own your crypto unless you have it in your own wallet, secured by your own private key.
Most of the time, this isn’t a major issue. Cryptocurrency exchanges do countless transactions each day for customers around the world. However, leaving cryptocurrencies to sit in an exchange carries a risk. Cryptocurrency exchanges have gone bankrupt in the past when outside parties have stolen their reserves or due to internal fraud. While most exchanges seem very stable today, so did those ones.
Cryptocurrency exchanges also charge fees. These fees will vary depending on the specific exchange, the cryptocurrency being bought or sold, and the amount, but they can generally be around 0.5%.
There’s also the matter of anonymity. In the US and some other countries, cryptocurrency exchanges must meet know your customer (KYC) requirements. This means that anyone using cryptocurrency for the benefit of anonymity won’t be able to use the most reputable cryptocurrency exchanges, having to resort to potentially risky alternatives instead.
For crypto-to-crypto transactions, decentralized exchanges could be the best choice. These are decentralized apps that run on blockchains, providing a platform that allows holders to switch between different cryptocurrencies securely and affordably. However, they don’t have any way to bridge the final link between crypto and cash, leaving sellers looking for other solutions.
It’s also important to point out that there are services such as Bitcode Prime which try to present themselves as legitimate cryptocurrency exchanges. However, this fact is contested by review websites as can be seen here.
Always Remain Cautious When Selling Crypto
There are many scams out there that target people looking to cash out their crypto. They might offer anonymity, protection from taxes, better exchange fees, or other perks. However, they could simply take your crypto and never send the cash. Anyone who isn’t confident in their ability to assess these opportunities should take the safer bet and go with a major cryptocurrency exchange.