How to Cash Out Large Amounts of Bitcoin

You managed to buy a few hundred bitcoins back in 2010 when they were practically worthless and are now looking at over two million US dollars worth of digital currency. Now your very own luxury apartment, car or maybe even private tropical island are within your reach, but you are wondering how to cash out large amounts of bitcoin. In this crypto guide, we’ll try to shed some light on this problem we all wish we had.

Things to think about before you cash out bitcoin

There are a few things to consider before cashing out bitcoin, especially in large amounts. You need to think about:

  1. Crypto exchange limits
  2. Bank movements
  3. Taxes
  4. Best way to cash out bitcoins

Let’s tackle each one.

Withdrawal limits on crypto exchanges

Most crypto exchanges place limits on the amount of money users are allowed to withdraw each day. These limits can be as little as a few thousand dollars or they can be much higher. For example, the Coinbase withdrawal limit is 10,000 USD per day. For Kraken, the limit is 5,000 USD per day in crypto at tier 1 (Fiat currency withdrawals aren’t available for this level). Typically, crypto exchanges allow you to increase your withdrawals limits by upgrading your account level. For example, upgrading a Kraken account to tier 2 enables fiat withdrawals (up to 100,000 USD per day) and increases the crypto daily withdrawal limit to 500,000 USD.

How to cash out large amounts of bitcoin

If you are going to cash out on a large amount of bitcoin, make sure your withdrawal limits can handle that amount. Alternatively, you might withdraw from several exchanges instead of just one. Since upgrading your account means providing the exchange with more personal information, users who wish to maintain anonymity might prefer this last option.

Unusual bank account movements

Money laundering is a serious issue. Let’s suppose you’ve had your bank account for some time, keeping a balance of a few hundred dollars at a time and suddenly receive a very large transfer. Enough to buy a small tropical island. Understandably, your bank might have some questions for you. They might even freeze your account until you can provide satisfactory answers as to where that money is coming from.

There really is no way around this except to talk to your bank executives before making the deposit. Let them know you will receive an unusually large amount of money, and explain just where this money comes from. If you can convince them the funds were obtained legally, they might be okay with it. If, after hearing you out, the bank decides not to accept the deposit (some banks absolutely refuse to accept deposits related to cryptocurrency trading), you may have no choice but to open an account at a different bank.

Make sure you pay your taxes on bitcoin earnings 

Richard Nixon did end up getting in a lot of trouble, of course. But it wasn’t tax-related. The truth is that receiving large amounts of money means that you will have to pay more taxes, whether that money comes from crypto trading or not. Assuming you don’t want to be the next Al Capone, you should most definitely report and pay your taxes.

Reporting and paying your taxes is general advice, but tax laws can be very different depending on your country or region. You must consult with an accountant or lawyer who specializes in taxes. Even better, a lawyer or tax accountant that is familiar with or specializes in crypto taxes. Anyone of these specialists might be able to help you legally deposit your funds with lower tax rates, which should more than make up for the fees they will surely charge you.

Best way to cash out bitcoin

There are several ways to convert Bitcoin to fiat currency. Selecting which the best way for you depends on if you want to convert bitcoins to cash anonymously. There are two general methods for converting bitcoin: on an exchange or off an exchange.

  • On-exchange: crypto exchanges offer the advantage of fast, reliable and secure transactions. Some of these exchanges trade in fiat currencies and allow you to link your bank account so you can withdraw directly. However, to increase withdrawal limits to a range adequate for large amounts of bitcoin you must provide personal information, which compromises anonymity. Slippage can also be an issue when cashing in on-exchange.
  • Off-exchange: this type of trading happens directly between two people. There are two slight variations of this method: One is to trade with an over-the-counter (OTC) broker and the other one is peer-to-peer (p2p) trading. In both cases, you would be trading directly with a person. The difference is that the former is a professional crypto trader, while the latter is not. Off-exchange trading allows greater levels of anonymity, but you must be very careful who you trade with. The same anonymity that protects you also offers a layer of protection to scammers who may be after your bitcoin.

Recently a third option has been gaining popularity and some say that it is the future of crypto trading. This third option tries to offer the best of both worlds: the speed and security of on-exchange trading with the anonymity of off-exchange options. This alternative is to use a decentralized peer-to-peer exchange. These exchanges work similarly to p2p markets. A bit more on this below.

Let’s assume that you are willing to proceed with your cash-out. You have already gotten the go-ahead from your bank, consulted with a lawyer or accountant and are ready to report the funds and pay your taxes before retiring to French Polynesia.

How to cash out large amounts of bitcoin on-exchange

You will first need to select a crypto exchange that trades in fiat currency. Kraken, Coinbase, and Bitstamp are among the most popular options for this. You will have to sign up for an account if you don’t already have one and verify it to the level needed to withdraw your desired amount of money. You could even decide to not settle for just one of these exchanges, but rather divide your bitcoins among two or more of them and withdraw from all exchanges at the same time. This would let you add the daily withdrawal limits from each exchange.

best way to cash out bitcoins

After you create your account(s) you might find that you are required to make a fiat currency deposit before you can make any withdrawals. If this is the case, do so. Even a small amount will do. Even if this isn’t required, it might be a good idea to do it to make sure the link to your bank account is set up correctly.

Once everything is set up and ready to go, send your bitcoins to your exchange wallet. After they are there, withdraw the desired amount to your bank account and wait for the funds to show up. Keep in mind that it can take from one to five days for the funds to be available.

How to cash out large amounts of bitcoin off-exchange

If you require a level of anonymity that crypto exchanges don’t provide, or find their fees too high or the withdrawal process too slow, then you want to go off-exchange.

If you prefer to trade with an OTC broker, you’ll find they aren’t exactly listed in the yellow pages. These are people who may be involved in multi-million dollar trades regularly, so they tend to remain low-key. But if your lawyer or accountant is a specialist in crypto trading, they may well be able to suggest some names to you.

If your off-exchange option is a p2p marketplace, the most popular places are Localbitcoins and Paxful. Both markets operate in almost any country in the world and operate similarly.

To sell your bitcoins on localbitcoins, you must first create an account. After the account is created, you will have to provide some personal information, so the process won’t be completely anonymous, but you won’t have to provide as many details as you would on crypto exchanges.

After everything is set up, you will have to search the marketplace for a person that is offering to buy the amount of bitcoin you wish to sell. Once you find one, send them a trade request and localbitcoins will send them a notification.

Once your trade request is accepted, you will send your bitcoins to localbitcoins and they will hold them in escrow. That means that, for a time, you won’t have your tokens, but neither will your buyer. Once you have received your fiat currency (in your bank account, PayPal or other methods), you will notify localbitcoins and only then will the tokens be sent to your buyer’s wallet.

What about the third option?

The final option for cashing out your bitcoins is to use a decentralized peer-to-peer exchange. At the moment, the most functional of these exchanges is Hodl Hodl. These exchanges operate in a similar way to p2p marketplaces like Paxful and Localbitcoins, with two key differences. First of all, instead of the exchange itself holding your tokens in escrow, a multi-sig smart contract will be created, and the escrow will be held there. Second, you can choose whether to provide personal information or not. In other words, on these platforms trading can be completely anonymous. The learning curve is a bit steeper than on p2p markets, and these exchanges don’t have many users yet. But some experts say the future of crypto trading will be on this kind of exchange services.

In conclusion…

That about wraps it up on how to cash out large amounts of Bitcoin. Cashing out millions of dollars worth of bitcoin is certainly doable, and there are several ways to accomplish this, depending on your need for speed, security, and anonymity. Remember to first talk to your bank to get the green light for the transaction, and to consult with a lawyer or accountant with expertise in cryptocurrency tax laws. Report your assets, pay your taxes, and enjoy. Finally, if you’ve found this article helpful and end up buying Morakorako Island, think about inviting me over for a weekend!

Let me know in the comments if you have any questions!

Read more: How to buy altcoins with USD

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