Selling Bitcoin can be tricky as some exchanges require more information about you to comply with regulation in the jurisdiction they are located. However, there are two main methods for exchanging Bitcoin or any of your Crypto currencies – direct with a person either via an online intermediary or physically at a meet up, or via an exchange online.
Both carry risks in their own way and various forms of requirements – the more risk is with the direct trade but holds higher requirements.
If you want to trade direct with another person online you can do it via Local Bitcoins and even choose to meet the person directly by arranging a time and location to meet up and swap your Bitcoins for cash. Other exchanges/wallet hybrids can allow you to exchange Bitcoins internally in their ecosystem through mediating a price chosen through analysing the market and its midpoints – so essentially a zero commission zero spread exchange. Coinbase is an example of this.
There are other means as well such as Bitcoin ATM’s where you can transfer your Bitcoin back to cash or alternatively you can go to a Bitcoin meetup and negotiate a price with an individual. Usually the market isn’t as efficient as an online exchange and depending on the circumstances there can be discounts or premiums depending on the general consensus. Usually though if you wish to sell at these events there is more demand to Buy than to sell so you can generally achieve a premium to the market price of between 5-10%.
If you wish to use a traditional exchange there are two options for selling them. You can enter a price and quantity that you wish to sell at and this will be placed in the order book. So for example if the price is $400 you can choose to sell 1 Bitcoin @ $405 dollars if you believe the price is going to rise and you aren’t too worried about making the transaction immediately.
Alternatively, if you wish to make the trade immediately you can eat into the buy side of the orderbook – or people prices and quantities that they wish to buy – so imagine an orderbook where someone wishes to buy 0.5 BTC @ $395 and another person wishes to buy 0.5 BTC @ 396, you can enter an order and sell your Bitcoin for a blended price of $395.5.
To be able to remove your cash from an exchange there are some onerous procedures to comply with before you can release your cash into a traditional bank account once you have traded your Bitcoins. Matching or escrow services such as localBitcoins don’t generally require this but exchanges such as Bitstamp do – they need to keep in line with local regulations on anti money laundering and know your client procedures.
There are then problems with getting your cash out as SEPA transfers via the traditional banking system can have extortionate fees applied – anywhere in the region of 5-15$ for receiving your cash after the Bitcoin transaction has taken place. There can also be time delays of up to four days. Some exchanges and wallet, such as Coinbase, can reduce this time and some of the fees by linking debit cards into the account system.
The same situation can apply to other crypto exchanges, for example buying Darkcoin with USD on Cryptsy or Litecoin with Renminbi on Bter. These crypto to crypto and fiat exchanges generally have lower volume than the larger pure fiat to Bitcoin exchanges so the premiums and discounts to the mid market price (liquidity) are generally more punitive. i.e. you won’t get as much as you could.
A further problem with exchanges is where it has been hacked or has liquidity problems such as what occurred with Mt Gox or with Mintpal. Your cash and or Bitcoins are not 100% safe. One route to add an extra layer of security is to choose an exchange that stores the majority of its Crypto currencies and Bitcoins via cold storage, such as Cavirtex.
In all selling is tricky depending on how you wish to do so. But as the industry develops and debit cards are linked into wallets and exchanges the process will become simpler, easier and less painless. See our exchange comparison to work out how you want to get a position of see our guide on how to buy bitcoins and crypto currencies.
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- How to trade Bitcoin and other Crypto Currencies Using an SMA?
- How to trade Bitcoin with the Relative Strength Index?