Everything you need to know if you want to sell cryptocurrency
To buy or sell cryptocurrency, you no longer need to know the program code or register on the Darknet, making your way through dozens of fraudulent offers. All you need is a crypto wallet and desire.
You somehow ended up with several million satoshi, or even a couple of whole bitcoins from the time when they cost tens of dollars — that’s great! Or you were paid a salary in USDt. If you want to cash out your savings, you have to sell cryptocurrency. It is almost always easy to do. As, however, with other cryptocurrencies. Even though the Internet is full of information on how to buy cryptocurrency, the situation with the sale is less clear. Let’s try to figure it out.
Cryptocurrency Sale Methods
The most apparent option is finding a friend who wants to buy them and negotiating a fair exchange rate with him. The advantage of such a transaction is that it takes place without intermediaries and does not imply any commission (except for the commission of the cryptocurrency network for the transaction itself). You will transfer your cryptocurrency to the address of a friend, and he will give you cash or transfer money to your bank account. If both parties value good relations over immediate benefits, then the risk of deception is minimal.
How to sell bitcoins or other coins if I have no acquaintances interested in cryptocurrency?
There are several options: for example, you can learn how to trade on a cryptocurrency exchange or find a suitable exchanger.
An exchange (like Bitstamp or Binance) opens accounts for clients within the system (they will have to transfer their coins there first), allows them to make transactions at the market price (including automatically using robots), and withdraw funds to their accounts. But exchanges are sometimes hacked, and their owners can suddenly restrict the withdrawal of funds. In addition, for a one-time transaction, this system is complicated: after completing the transaction, you will still have to deal with the withdrawal of funds.
What kind of exchanges?
These are special platforms that act as intermediaries in transactions for the purchase and sale of cryptocurrency. Unlike an exchange, you will receive your money as soon as the transaction is completed. Traditional exchangers operate according to the following scheme:
- The seller and the buyer find each other thanks to the exchange site.
- Each of the parties transfers funds (cryptocurrency and money) to the so-called escrow accounts of the exchanger.
- The employees of the exchanger are waiting for the fulfillment of obligations by both parties.
- If the seller and the buyer have transferred the required amounts, the exchanger sends money from the escrow accounts to the seller and the cryptocurrency to the buyer. Otherwise, the exchanger returns the funds to its owners.
What do “traditional exchanges” mean? Are there any others?
Yes, they are also decentralized or peer-to-peer (p2p) exchangers. They allow you to carry out transactions directly, without the involvement of an intermediary and the provision of documents for mandatory identification, which some companies require. Decentralized exchanges offer a variety of fraud protection techniques. For example:
- LocalBitcoins allows the seller and the buyer to meet in person (offline) if they wish to conclude a deal. It is worth noting that such meetings can be even riskier.
- The developers of Coinffeine proposed a protocol in which the seller and the buyer must make a mandatory deposit to escrow accounts in some bank, which is returned only after the transaction is completed. In this case, the transaction itself can be divided into several microtransactions, and each of them must be less than the deposit made. It is beneficial for the parties to complete the exchange so as not to lose the deposit.
- Bisq (formerly known as Bitsquare) allows the seller and buyer to select an arbitrator who only intervenes when a dispute arises. In this system, the seller of the cryptocurrency transfers funds to the so-called 2/3-multi-sig address. It is the simplest form of smart contract: the buyer can only dispose of them if another party confirms the transaction — the seller or the arbitrator. If the transaction is not completed after a few days, the parties can contact the arbitrator, demanding a transfer (to the buyer) or return (to the seller) of bitcoins. The arbitrator will require confirmation of the money transfer and will decide who to trust. But here, too, the seller may be left with nothing if the buyer manages to challenge his bank transfer after taking possession of the cryptocurrency.
Can I choose any of these selling methods?
Yes, if the exchanger does not refuse to work with you (as in some cases with US citizens).
Is it legal to sell cryptocurrency?
Yes, although many countries’ governments consider the use of cryptocurrencies to be the basis for checking such transactions for involvement in the laundering of proceeds from crime or the financing of terrorism. However, as of September 2021, most countries report no ban on transactions using cryptocurrency.
Can they find out about my income from the sale of cryptocurrency?
Most likely, they will not know if the amounts are small. But if your expenses do not match your official income, the IRS can check. Tax evasion is considered an offense or even a criminal offense.