One of challenges about buying and selling cryptocurrencies is sieving through crypto exchanges to find the right one. This post is about which crypto exchanges to use and how to cash out. Enjoy! 🙂
There are many types of crypto exchanges.
Some of the exchanges offer fiat entry with a limited selection of coins. Others offer a wide variety of coins because they are well established in the market. And some others strictly offer new, “unproven” coins.
Generally, there are three main types of crypto exchanges:
- Fiat-to-cryptocurrency exchange;
- Centralised crypto exchange; and
- Decentralised crypto exchange.
Those that fall within this category include Coinbase, Gemini, or COSS.
Fiat-to-crypto exchanges allow the users to buy crypto directly with the aid of fiat currency like USD. Unsurprisingly, they are essential components of the blockchain/crypto ecosystem.
The main shortcoming of fiat-to-crypto exchanges is that they usually have a limited selection of coins which is available for purchase. Because these fiat-to-crypto exchanges deal with legal tender, they are constantly scrutinised by the government. Therefore, they need to religiously abide by rules and regulations.
This makes these exchanges add coins at a very slow rate. This is because they have to confirm that the coin which is added to their project are legitimate coins, and also compliant with the law.
Fiat-to-crypto exchanges likewise require detailed “Know Your Customer” (KYC) processing for the exchange users. New investors may also choose to end their journey at this step if they are content with only investing in larger, established projects.
Investors that are seeking more risk as well as more rewards would use fiat exchange to get Ethereum or Bitcoin which they will use to buy altcoins on a crypto exchange.
Centralised Crypto Exchanges
Exchange in this category includes Robinhood, Binance and Kucoin. These exchanges offer trading pairs as well as other coins.
Example: If you want to buy an alt-coin, say AelfCoin, you have to offer one other coin it is paired with, such as Ethereum or Bitcoin.
Centralized crypto exchanges are more relaxed when it comes to regulatory compliance as well as customer KYC processes. This is because they do not collect fiat currencies directly from the users.
Moreover, centralized crypto exchanges would only add coins after those coins have reached a certain level of maturity in the market. Centralised exchanges like binance tend to do the due diligence on behalf of the masses and are in general not overzealous with the addition of new coins. They also tend to verify the legitimacy of coins before adding them to the exchange.
Decentralized Crypto Exchanges
Centralized crypto exchanges are extremely vulnerable to hackings, as detailed in this post. Here, decentralized exchanges is a solution. IDEX is one of the exchanges which fall into this category. Waves DEX is yet another example. These exchanges likewise offer trading pairs with other coins.
Decentralized exchanges significantly enhance security by keeping customer’s information or asset from any central server. This implies that hackers would not be able to steal anything in the case of a security breach. This is an improvement over centralized exchanges, which, as history has shown, are vulnerable to hackers.
Decentralized exchanges are the most lax when it comes to regulatory compliance, and it also offers a completely anonymous experience for the users. Because of this, decentralized exchanges are the first place where coins are listed.
This can be referred to a double demerit because it would serve as invitation for investor for a promising project but could also leave the investor vulnerable to scam projects. Therefore, decentralized exchanges are only recommended for users that have done a significant market research.
Putting It All Together
Having understood what each type of exchange is used for, you can easily decide which type of exchanges to use.
The purchasing flow usually starts with a fiat-to-crypto exchange. Cashing out goes in the opposite direction because it would begin with a crypto exchange and end with legal tender.
How to Cash Out
There are different ways you can exchange your cryptocurrencies for cash. These methods include: bank transfer, PayPal and even through cash deposit. You can likewise cash out through broker and peer-to-peer exchange.
Different Cash Out Methods
Several things have to be considered when cashing out cryptos. Some of which include:
- Do you want the easiest or the cheapest method?
- How long do you want to wait to receive your cash?
- Which currency do you need to change your cryptocurrencies to?
These are some of the questions which you need to ask yourself so that you will be able to choose the best method which suit you.
Third-Party Broker Exchange
A third party broker is just another name for an exchange. Some crypto exchange do not allow you to deposit funds using fiat money. In this case, you will have to deposit your Bitcoin into the exchange first. Thereafter, you can then request for a fiat currency withdrawal once exchange receives your Bitcoin.
Most people do this through bank transfer. Because of strict Anti-Money Laundering (AML) laws, you will have to withdraw to the same account that you deposited into. If you have never deposited fiat on to a broker exchange, then you will need to make a deposit first.
If you decide to cash out your Bitcoin with the aid of broker exchange such as Coinbase, then it will normally take about 1-5 days for the money to get to your account. The payments are made through SEPA for customers in EU. If you want to sell Bitcoin for USD, brokers usually make use of SWIFT payment method.
You can likewise use a peer-to-peer platform if you like an anonymous and faster approach. If you do not want to wait for three days to get cash from a third-party broker exchange, you should consider using a peer-to-peer selling platform such as LocalBitcoins or LocalEthereum.
When selling Bitcoin to other people on LocalBitcoins, you can easily decide the payment methods which you want the buyers to use. These include:
- Cash deposit: You can ask the buyer to deposit the cash in your bank account but it is crucial for you to ask them for a proof of ID as well as payment proof before releasing the coin to them.
- Bank Transfer: You can request bank transfer payment from the buyer; you likewise need to request proof of ID from the buyer before going ahead with the transaction. The Bitcoin can be released when you have received the money.
- Meet in person for cash: You can arrange to meet up with a buyer who is within your locality who will pay you cash for your Bitcoin.
P2P selling is the safest means if you know what you are doing. However, it is essential for you to be aware of fraudsters.
LocalBitcoin offers a good level of safety because they also offer an escrow service. This would keep your Bitcoin locked until you confirmed you have received the money paid into your account.
What Is Escrow?
Sometimes people are confused about what an escrow is. So let’s use an example to explain this:
- Michel wants to buy 1 Bitcoin. He resides in UK, so he decided to search for sellers in his country.
- Michel comes across David who wants to sell 1Bitcoin at a good price. David also accepts bank transfer as a means of payment.
- Michel sends his request for 1 Bitcoin to David. David accepts the offer.
- David puts his 1 Bitcoin into the escrow. The escrow holds the Bitcoin until Michel transfers the money to David.
- Michel transfers the agreed amount to David’s bank account.
- When David has received the payment, he releases the Bitcoin from the escrow. The bitcoin is then sent to John’s account.
That’s the procedure for selling Bitcoin in exchange for cash, using a P2P exchange!
IKIGUIDE’s Recommendations: Cashing out Bitcoin Using a Broker Exchange
Coinbase is one of the most popular broker exchange for buying and selling Bitcoin. They process more Bitcoin transactions than any other broker and likewise have a massive customer base of 13 million.
Withdrawal Methods: Coinbase allows you to sell Bitcoins for cash which can then be withdrawn into your bank account. Your Bitcoin can only be cashed into a bank account which has been used to buy cryptocurrency on Coinbase.
Fees: Fees depends on the country which your bank is located. For instance, if you sell Bitcoin for USD, $25 would be charged for wire transfer. If you are located in the EU and have SEPA, then it will only cost you $0.15! Click here for more information about Coinbase withdrawal fees.
Cash out times: Withdrawal times depend on the country that your bank is located. US withdrawals normally take between 4-6 working days, while EU withdrawals take between 1-3 working days.
This article is part of our “Cryptocurrency for Beginners” series. Feel free to read up on the rest of the articles! What Is Cryptocurrency? | What is a Cryptocurrency Wallet? | What Is a Cryptocurrency Exchange and how may we cash out? |FAQ: Top 5 Commonly Asked Questions About Cryptocurrency | A Brief History of Bitcoin, Ethereum and Alt-Coins