How Do I Convert Bitcoin to Other Currencies?
Want to convert your Bitcoin into a more universally-accepted currency? Thanks to the popularity of Bitcoin, it’s now relatively easy to convert Bitcoin to USD, EUR, CAD, AUD, GBP, and other major world currencies.
There are currently four main ways to change your Bitcoins into other currencies:
-Direct Trades: Trade your Bitcoin directly with another person in exchange for the currency of your choice, with an intermediary person or website facilitating the transaction.
-Exchange Trades: Trade your Bitcoin with an exchange as opposed to another individual.
-Peer to Peer Trading Marketplaces: Let someone else buy goods and services in a certain currency on your behalf, then give that person Bitcoin.
-Person to Person Transactions: Meet someone in the real world and exchange cash for Bitcoin via mobile app.
Below, you’ll find the pros and cons of each method.
Direct trading can be used to exchange your Bitcoin with another person’s currency with the help of an intermediary.
Websites that offer this type of trade include Coinbase and LocalBitcoins (both available in the United States) and BitBargain and Bittylicious (both available in the UK). If you have a US-registered bank account, then you can also use Coinbase or Circle, both of which are popular for their simplicity.
No matter which website you use, the basic system is the same: you register for the site, then post an offer signaling you want to sell. The website will alert you when a buyer wants to trade with you.
After you receive that alert, you interact exclusively with the buyer while using the website to complete the trade.
Exchange trades work in a similar way to direct trades. You still verify your identity and register with a trading site, but you don’t have to work so hard to complete the sale yourself.
Instead, you simply sell your Bitcoin to the exchange. The exchange acts as an intermediary where they hold everyone’s funds. You place a “sell order” if you want to sell your Bitcoin and a “buy order” if you want to buy Bitcoins.
That sell/buy order states the volume and type of currency you wish to sell/buy, and the price at which you want to sell that currency.
Your transaction will be complete when someone places a matching buy order. Once that happens, the currency will be credited to your account.
There’s one major risk to this problem: your funds are held at an intermediary. That intermediary may not be 100% legitimate. It could go bankrupt or have liquidity problems. If that’s the case, then you may face delays when withdrawing funds to your bank. Or worse, the intermediary could go bankrupt (as was the case with the infamous Mt. Gox situation), in which case you might never be able to withdraw your funds.
BTC-e is one popular Bitcoin exchange trader, although it has also suffered from liquidity problems. Users have complained about waiting inordinate amounts of time to receive their fiat currency funds in their bank account.
Other popular Bitcoin exchanges include Kraken, Bitstamp, and Circle. All of these sites let you trade Bitcoin for fiat currencies (like the USD, EUR, etc.)
In some cases, you might want to trade your Bitcoin for other cryptocurrencies, in which case there are ways to do that as well. Certain exchanges exclusively let you trade Bitcoin for cryptocurrencies like Dogecoin and Litecoin, for example. Those sites include BTER, CoinCorner, and Cryptsy.
In addition to liquidity issues, another problem with these exchanges is that you’ll lose some money along the way. BTC-e, for example, changes a 0.2% transaction fee. Some exchanges also place a limit on how much currency you’re allowed to hold at any one time.
Peer to Peer Trading Marketplaces
One of the most unique ways to exchange Bitcoin for goods, services, and currency is to use a peer to peer trading marketplace. This process is relatively new, but becoming more popular.
Basically, this process brings two groups of people with specific and complementary needs together.
The first group consists of people who have Bitcoin and want to buy real goods and services from a site or store that does not currency accept Bitcoin.
The second group consists of people who want to buy Bitcoin with a credit card or debit card.
The first group places an offer on a trading marketplace. This marketplace acts as a platform for the transaction.
The offer could simply look like an Amazon wish list. John uploads his Amazon wish list on the marketplace and states the full price of the items as well as the discount they would like (say, 10% or 25%).
Kate is browsing the peer to peer marketplace and has a credit card or debit card and wants to buy Bitcoin in the same amount as John’s wish list value. Kate accepts the trade and buys the products from Amazon, requesting to have them shipped to John’s address.
Once the goods are delivered to John’s address, John notifies the marketplace. Kate’s Bitcoins are released (they were held in escrow by the exchange while the transaction was being processed). The agreed discount rate and a small marketplace fee are subtracted from the total amount of Bitcoin.
User-requested discounts of 25% are not uncommon at Bitcoin peer to peer marketplaces. Many users are willing to pay that 25% fee because this is the best method of buying Bitcoin with a credit card or bank card.
How to Withdraw Funds from Bitcoin Trading Sites
Now that you know how to exchange your Bitcoin into fiat currencies, how do you actually withdraw money to your account?
This is where things can get a little bit complicated.
First, almost all Bitcoin exchanges support international wire transfers. This is the easiest way to move money around the world. Provided you’re working with a legitimate Bitcoin exchange, there’s little risk to this method.
If you live in the European Union, you can also take advantage of the Single European Payments Area (SEPA) system, which facilitates transactions between EU member countries. These transfers take about 4 days to go through and typically require a small payment on your end. Banks typically charge a minimum of 4 per transaction (HSBC), while others banks, like Barclays, charge 15 per SEPA transaction and 25 for all international transactions.
Another problem is that certain banks refuse to do business with people involved in Bitcoin trading. HSBC, for example, particularly seems to hate Bitcoin trading. OKPay also became notorious for refusing Bitcoin transactions.
Verifying your Identity on Bitcoin Exchanges
Bitcoin exchanges currently have limited regulation. Still, smart Bitcoin exchanges realize that regulation is coming, which is why they’re pre-emptively collecting personal data on all their users.
Verifying your personal identity on Bitcoin exchanges is straightforward, although it can be a bit annoying.
A typical identity verification involves uploading scans of two utility bills that display your name and address along with photo identification (like a passport or driving license).
Some Bitcoin exchanges take this one step further and will actually ask you to take a selfie with your photo ID and the name of the market on a piece of paper. BitBargain UK makes its users do this in order to verify their account.
Unfortunately, there are no good ways around these requirements. If you’re unwilling to share your identity with Bitcoin exchanges online, then you’re going to have a difficult time buying and selling Bitcoin.
Selling Bitcoin in Person
So far, all of the Bitcoin transaction methods we’ve discussed are found online at different types of exchanges. But there’s another Bitcoin transaction method most people ignore: a face-to-face transaction.
Selling Bitcoin in person is easy: you simply scan a QR code on another person’s phone and accept cash in hand, then send Bitcoin to that person’s address.
Obviously, selling Bitcoin in person can also be very dangerous. Here are some tips that will help your transaction go as smoothly as possible:
-Base your transaction exchange rate on the current price from a major Bitcoin exchange
-Some Bitcoin sellers will add a small fee to that exchange rate in order to “covert costs” or as a convenience/anonymity fee
-Any time you’re carrying a large amount of cash to a transaction, it’s important to meet in a safe public space or come with a friend
-Check sites like LocalBitcoins to find Bitcoin sellers in your area or to advertise yourself as a seller. This site actually rates Bitcoin sellers based on their trustworthiness and previous transactions. On LocalBitcoins, you don’t need to verify your identity. The site also supports online transactions and escrow, although this is not needed for face-to-face Bitcoin transfers.
If the idea of meeting someone in person in your city sounds frightening, then there’s a way to avoid this problem: you can find Bitcoin meetups at major cities around the world. At these meetups, buyers happily buy and sell cryptocurrencies. Plus, you enjoy safety in numbers. It’s kind of like an offline Bitcoin exchange.