How to Convert Bitcoin to Cash

The basic steps to turn bitcoin into dollars

To convert bitcoin to cash, you sell your bitcoin on a cryptocurrency exchange, transfer the dollars to your bank account, and withdraw them. The exchange holds your bitcoin temporarily, matches you with a buyer, and sends you the sale price in US dollars (or another currency). The whole process usually takes a few minutes to a few hours, though your bank may take one to three business days to show the deposit.

The speed and cost depend on which exchange you use, how much bitcoin you're selling, and how you move the money out. Some exchanges charge a flat fee per transaction. Others charge a percentage of what you sell. Your bank may also charge a wire transfer fee if that's how the exchange sends the money.

You'll need three things to start: a cryptocurrency exchange account (which requires identity verification), your bitcoin stored somewhere the exchange can access it, and a bank account in your name to receive the dollars.

Key Takeaways

• You sell bitcoin on a cryptocurrency exchange, which converts it to dollars and sends the money to your bank account.
• The sale itself takes minutes to hours, but your bank may take one to three business days to deposit the funds.
• Exchanges charge fees that vary by platform — some charge a flat amount per trade, others charge a percentage of the sale.
• You must verify your identity with the exchange before you can sell, which involves providing your name, address, and sometimes a photo ID.
• The dollar amount you receive depends on the bitcoin price at the moment you sell, which changes constantly throughout the day.

Choosing an exchange to sell on

The most common exchanges for converting bitcoin to cash are Coinbase, Kraken, Gemini, and Bitstamp. Each one lets you sell bitcoin and withdraw dollars to a US bank account. The differences are in their fees, how long verification takes, and which payment methods they accept.

Coinbase charges around 1.5% to 2% per transaction for most users, though the exact rate depends on your payment method and account history. Kraken charges between 0.16% and 0.26% per transaction, making it cheaper for large sales. Gemini charges a flat $0 to $15 depending on your account tier. Bitstamp charges 0.5% per transaction.

If you already have an account on one of these exchanges and your bitcoin is stored there, you can sell when ready after identity verification is complete. If your bitcoin is stored in a personal wallet (a software or hardware device you control), you'll need to transfer it to the exchange first, which takes 10 minutes to several hours depending on network traffic.

Identity verification and account setup

Before you can sell bitcoin on any major exchange, you must verify your identity. This is a legal requirement under anti-money-laundering rules. The exchange will ask for your full legal name, date of birth, address, and usually a photo of your ID (driver's license or passport).

Verification usually takes a few minutes to a few hours, though some exchanges may take up to 24 hours if they need to review your information manually. Once you're verified, you can sell bitcoin when ready. You do not need to verify again for future sales on the same exchange.

Some exchanges offer different verification levels. A basic level might let you sell up to $1,000 per day. A higher level (which requires more documentation) might let you sell $10,000 or more per day. Check your exchange's limits before you try to sell a large amount.

Selling your bitcoin and choosing a withdrawal method

Once your account is verified and your bitcoin is on the exchange, you place a sell order. You tell the exchange how much bitcoin you want to sell, and it shows you the price you'll receive in dollars. You confirm the sale, and the exchange converts your bitcoin to dollars in your account.

Next, you choose how to move the dollars out. Most exchanges offer bank transfer (also called ACH transfer or wire transfer). Bank transfer is free or costs $0 to $15 depending on the exchange. Some exchanges also offer PayPal, debit card, or other methods, which may have different fees and speed.

Bank transfer is the most common choice. You enter your bank's routing number and your account number, and the exchange sends the dollars. ACH transfers (the standard bank-to-bank method) usually take one to three business days. Wire transfers are faster (same day or next day) but may cost more.

What happens after you request a withdrawal

After you request a withdrawal, the exchange processes it on their end, which usually takes a few minutes to a few hours. Then the money travels through the banking system to your bank. With ACH transfer, your bank receives it within one to three business days. With wire transfer, it usually arrives within one business day.

During this time, the dollars are in transit — they've left the exchange but haven't arrived at your bank yet. You can't spend them until your bank shows the deposit in your account. Weekends and bank holidays can add extra time.

Once the money arrives in your bank account, it's yours to spend or withdraw as cash. You can use your debit card, write a check, or visit an ATM. There are no additional steps or fees from the exchange at this point.

Fees and costs to expect

The total cost of converting bitcoin to cash includes the exchange's trading fee, the withdrawal fee, and sometimes your bank's fee. Trading fees range from 0.16% to 2% depending on the exchange. Withdrawal fees range from $0 to $15. Your bank may charge $0 to $15 for receiving a wire transfer, though most banks don't charge for ACH transfers.

On a $1,000 sale, total fees might be $15 to $35. On a $10,000 sale, they might be $50 to $250. The percentage-based exchanges (like Coinbase and Kraken) become cheaper at larger amounts, while flat-fee exchanges (like Gemini) become cheaper at smaller amounts.

Some exchanges offer lower fees if you have a higher account balance or if you use certain payment methods. Check your exchange's fee schedule before you sell, because the rate you see may not be the rate you pay.

Tax reporting and record-keeping

When you sell bitcoin, you may owe capital gains tax on the profit. If you bought bitcoin for $5,000 and sold it for $8,000, the $3,000 difference is taxable income. This is true whether you convert it to cash or not.

The exchange will send you a tax form (usually Form 1099-K or Form 1099-MISC) if your sales exceed a certain threshold, which varies by exchange and state. You should keep records of when you bought the bitcoin, how much you paid, when you sold it, and how much you received. These records help you calculate your gain or loss.

If you're unsure whether you owe tax or how much, speak with a tax professional. Tax rules for cryptocurrency are still developing, and the rules may differ based on how long you held the bitcoin and your total income.

Frequently Asked Questions

How long does it take to convert bitcoin to cash?

The sale itself takes minutes to hours on the exchange. The withdrawal to your bank account takes one to three business days for ACH transfer, or same-day to next-day for wire transfer. Total time is usually one to four business days from when you start the sale.

Can I withdraw cash directly from an ATM after selling bitcoin?

No. You must first sell the bitcoin on an exchange and withdraw the dollars to your bank account. Once the dollars are in your bank account, you can withdraw cash at an ATM or visit a bank branch. The exchange does not give you cash directly.

What if I sell bitcoin and the price drops before the dollars reach my bank?

The price doesn't matter once you've sold. You locked in your sale price when you placed the sell order on the exchange. The dollars you receive are fixed, regardless of what the bitcoin price does while the money is in transit to your bank.

Do I have to pay tax on bitcoin I convert to cash?

You may owe capital gains tax on the profit from the sale. If you sold the bitcoin for more than you paid for it, the difference is taxable. The exchange will report large sales to the IRS, and you should report the gain on your tax return. Speak with a tax professional about your specific situation.

What's the difference between selling on an exchange and using a Bitcoin ATM?

Bitcoin ATMs let you sell bitcoin and receive cash when ready, but they charge much higher fees — often 5% to 15% or more. Exchanges charge lower fees but require a bank account and take a few days. For most people, an exchange is cheaper if you can wait a few days for the money.