In this article:
Whether you bought, mined or were gifted cryptocurrency, you might be ready to cash out and use the money for something else. Thankfully, selling cryptocurrencies isn't necessarily difficult, and there are several ways to go about it. But before taking action, you'll want to compare your options, their fees and understand the potential tax implications of selling or exchanging crypto.
6 Ways to Sell Bitcoin and Other Cryptocurrencies
Your options might depend on how you bought and where you're keeping your crypto, but here are six ways you might be able to sell Bitcoin and other cryptocurrencies.
1. On a Centralized Exchange
Centralized crypto exchanges are run by companies that create and enforce the exchange's policies. For example, Coinbase is a well-known centralized exchange that allows you to easily buy and sell crypto based on its terms and conditions.
If you already have an account at an exchange, you'll simply need to log in and then follow the platform's process for selling your crypto. If you don't have an account yet, you'll need to create one and send your crypto to it before selling.
Depending on the exchange, the proceeds from the sale might get deposited into a connected bank account or stored in your account.
2. Via a Crypto Wallet or Off-Ramp
Crypto wallets can be a safe place to store and manage your cryptocurrencies. Some wallets have built-in off-ramps—a reference to the capability to crypto move off of a blockchain network and into fiat money, such as U.S. dollars. You also might be able to connect your wallet to an off-ramp app to make a sale.
The off-ramp will generally ask for your bank or debit card info and deposit the proceeds from the sale into your account. Although the sale happens immediately, it might take several days for the money to appear in your account.
You'll need to find an off-ramp that's compatible with the crypto you're selling. Also, compare fees and reviews to make sure the off-ramp is a legitimate service. Otherwise, you might inadvertently send your crypto to a scammer.
Learn more >> How to Avoid Cryptocurrency Scams
3. On a Decentralized Crypto Exchange
Some people or groups set up automated apps for trading crypto called decentralized exchanges (DEX). Unlike with centralized exchanges, the creators don't necessarily control how it's run or offer much customer support after launching the DEX.
You may be able to connect your crypto wallet to a DEX and then exchange or "swap" one cryptocurrency for another. Some DEXes also have or partner with off-ramps if you want to sell your crypto for fiat currency instead.
4. At a Cryptocurrency ATM
Physical cryptocurrency ATMs might give you the option of getting cash for your Bitcoin and other supported cryptos. You'll need to send your crypto to the ATM, which you may be able to do by scanning the QR code that the ATM generates with your crypto wallet app.
Although ATMs might be convenient, it can take several minutes for your transaction to complete. Additionally, crypto ATMs tend to charge much higher fees than other options, so you'll get fewer dollars for your crypto.
5. Using Your Brokerage Account
If you bought a crypto ETF or mutual fund, you'll need to sell your shares using a brokerage account. The process is similar to selling stocks and non-crypto funds. Some brokerage accounts also let you purchase cryptocurrencies directly. You might need to sell these using the same account.
6. Spend Your Crypto at a Store
Some stores now accept Bitcoin and other crypto as payment for goods and services. You may need to connect your crypto wallet or sign in to your crypto exchange account to make a purchase online. Or, scan a QR code with your wallet or exchange account's app to make a purchase in stores.
What to Consider Before You Sell Crypto
Consider several things before selling your crypto:
- If you'll sell part or all of your holdings
- How you can minimize the fees for the sale
- Whether you have a better use for the money right now
Additionally, consider the tax implications of the sale. When you sell cryptocurrency for a profit, you need to report the earnings to the IRS when you file your tax return. Your profits are taxed as ordinary income when you held the crypto for a year or less before selling, and as capital gains if you held it for more. Capital gains have lower tax rates for most people, so there may be a tax benefit to holding crypto for at least a year before selling.
If you sell the crypto for less than you bought it for, you might be able to write off the losses when you file your tax return and reduce your taxable income. The losses could be short- or long-term capital losses depending on how long you held the crypto. If you had more capital losses than gains, you may be able to deduct up to $3,000 in excess losses from your ordinary income each year.
Can I Buy and Sell Crypto the Same Day?
You can buy and sell crypto at any time. Depending on the platform you use and the type of crypto, the transaction might be processed within seconds or minutes. Even if it takes slightly longer, you could still buy and sell crypto on the same day.
Do You Have to Report Crypto if You Don't Sell?
If you bought crypto with dollars and didn't sell it, you likely don't have to report anything. However, if you receive crypto as payment for a goods or services, earned crypto rewards, mined crypto, got staking rewards or received crypto from an airdrop, then the crypto might be considering income and you may need to report it.
You can report taxable earnings on your Form 1040 when you file your annual tax return. You report the income on a Schedule C if you were paid in crypto as an employee or contractor. Otherwise, you might report them on Schedule 1, where you list various types of additional ordinary income and adjustments to income.
The Bottom Line
Various services allow you to exchange one cryptocurrency for another or sell crypto for cash. But the specific options you can use might depend on the type of cryptocurrency you have and whether you're storing it in a wallet, on a centralized exchange or in a brokerage account. No matter which route you're considering, compare the potential service providers to find one that seems legitimate and either inexpensive or easy to use.