Do You Need A Bank Account For Bitcoin
One of the world’s largest Bitcoin trading platforms is Coinbase, and it allows you to withdraw your Bitcoin to your bank account. However, their service is restricted to those who have bank accounts in the United States or Europe. For those in the US, you can withdraw your Bitcoins using an ACH transfer, which takes five days. If you're buying Bitcoin for the first time, Binance and Coinbase offer education and all of the tools that you need to get started. Exchanges charge commissions—transaction fees for credit cards, debit cards, and bank transfers—as well as markups on Bitcoin to U.S. Dollar conversions.
- Can You Use Bitcoin Without A Bank Account
- Do You Need A Bank Account For Bitcoin Account
- Do You Need A Bank Account For Bitcoin
- Do You Have To Have A Bank Account For Bitcoin
Key Takeaways
What is bitcoin? What do you need to invest in bitcoin How to invest in bitcoin in 4 steps Is bitcoin a good investment Different ways to invest in bitcoin
Over the last several years, you’ve probably seen “Bitcoin” suggested as a cutting-edge investment option. There’s been a lot of debate about Bitcoin and other cryptocurrencies, its proponents arguing that it’s the future of currency and investing, while its detractors argue that it’s a risky investment option that may not generate big returns.
What exactly is Bitcoin, and how can you determine whether it’s the right investment for you? Read this beginner’s guide on how to invest in Bitcoin.
What is Bitcoin?
Bitcoin was created by a programmer or group of programmers using the name, “Satoshi Nakamoto.” But the real creator(s) of Bitcoin is still unknown to the public.
Bitcoin is one of the most widely used types of cryptocurrency. In a cryptocurrency system, virtual “coins” or “tokens” are used instead of physical cash. Coins have no intrinsic value and they aren’t backed up by gold or silver.
Bitcoin was created to solve a couple of big cryptocurrency flaws. First, it was designed to prevent crypto coins from being fraudulently duplicated. Think about how easy it is to make copies of the data on your computer—documents, photos, files, etc. Cryptocurrency wouldn’t be possible if anybody could just duplicate a coin and create an unlimited amount of currency for oneself. You can’t just make copies of a $20 bill, right? Likewise, there’s a need to prevent people from reproducing crypto coins.
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Bitcoin uses a digital technology called “blockchain,” which is an advanced coding mechanism that disperses a single code over thousands of different computers. For example, let’s say that your coin is built from the code, “XDA146DDS.” Blockchain segments the code into smaller pieces and stores the pieces of code across many computers. If a hacker wanted to gain access to the code, they’d have to hack a variety of different computers to access the entire code.
Blockchain also employs a “public ledger,” which uses thousands of computers (referred to as “nodes”) to keep track of coins and their owners. If a coin’s data is changed, the nodes will cross-reference each other’s records to verify whether the change is accurate and that it was initiated by the coin’s owner.
So, you might be asking, what is Bitcoin used for?
Once you purchase coins, you can use them in online transactions wherever they’re accepted. Remember, when you make a transaction with a coin, there’s no actual money being pulled from your bank account. Money only leaves your bank account when you purchase the coin itself—not when you make purchases with a coin.
Like cash currency, the value of a coin may fluctuate. That’s why some investors are getting excited about Bitcoin and other types of cryptocurrency. Investors speculate that the value of Bitcoin coins may rise significantly if there’s a surge in the market. I’ll explain the arguments for and against cryptocurrency investment later on.
What Do You Need to Invest in Bitcoin?
You don’t need very much to invest in Bitcoin! You only need your:
Personal identification documents
Bank account information
A secure internet connection
If you’re going to be purchasing coins through a stockbroker, you may not need to supply your personal information or financial information because your stockbroker will likely have all that on record.
How to Invest in Bitcoin in 4 Steps
Here’s how to invest in Bitcoin, in 4 easy steps.
1. Join a Bitcoin Exchange
First, you’ll need to determine where you want to make a Bitcoin purchase. Most Bitcoin investors use cryptocurrency exchanges. There’s no official “Bitcoin” company because it’s an open-source technology, but there are several different exchanges that facilitate Bitcoin transactions. These exchanges are the middlemen of cryptocurrency investing, like a stock brokerage.
If you decide to purchase from an exchange, you’ll have to decide which exchange you want to buy from. Here are a few of the most popular options:
Coinbase: A very popular crypto exchange that insures losses in the event of a security breach or fraudulent transfers
Bitfinex: The longest-running cryptocurrency exchange that’s optimized for advanced traders and lenders (unfortunately, Bitfinex doesn’t currently accept US customers)
Strategize the strengths and weaknesses of the company.
2. Get a Bitcoin Wallet
When you purchase a coin, it’s stored in a “wallet,” which is where all your cryptocurrency is stored. There are two types of wallets you can get: a “hot wallet” or a “cold wallet.”
A hot wallet is a wallet that’s operated by either your cryptocurrency exchange or by a provider. Some exchanges will automatically provide you with a hot wallet when you open your account. In any case, hot wallets are convenient because you’ll be able to access your coins through the internet or a software program.
Some notable hot wallets are:
Electrum: Software that enables you to store your coins on your computer
Mycelium: A mobile-only app for Android and iPhone users
However, hot wallets are not the most secure form of coin storage. If the hot wallet provider is hacked, then your coin information may be at risk.
A cold wallet is the safest storage method for your coins. A cold wallet is an actual piece of hardware that stores your coins, usually, a portable device that’s similar to a flash drive. Most cold wallets cost between $60 to $100. Some popular cold wallets are:
Trezor
Ledger Nano
If you’re only going to purchase small amounts of coin, then you might be fine using a hot wallet with an insured crypto exchange. But if you’re going to be trading large amounts of coin, then a cold wallet would be well worth your investment.
3. Connect Your Wallet to a Bank Account
When you’ve obtained your wallet, you’ll need to link it to your bank account. This enables you to purchase coins and sell coins. Alternatively, your bank account may be linked to your cryptocurrency exchange account.
4. Place Your Bitcoin Order
Now you’re ready to purchase bitcoin. Your cryptocurrency exchange will have everything you need to buy. The big question is, how much bitcoin should you purchase?
Some coins cost thousands of dollars, but exchanges often allow you to buy fractions of a single coin—your initial investment could be as low as $25.
Investing in bitcoin is very risky, and it’s important that you carefully determine your risk tolerance and review your investment strategy before you purchase any bitcoin. We’ll go over this in the next section.
5. Manage Your Bitcoin Investments
After you’ve purchased bitcoin, you can:
Use your coins to make online transactions
Hold your coins for a long period in the hopes it’ll appreciate in value
Perform day trading with your coins—that is, buying and selling coins with other bitcoin owners, which can be facilitated on the cryptocurrency exchange
Your cryptocurrency exchange will provide you with everything you need to buy and sell coins.
Can You Use Bitcoin Without A Bank Account
Is Bitcoin a Good Investment?
Here’s one of the most commonly asked questions about bitcoin: is bitcoin a good investment?
Well, no investment is truly “good” or “bad.” It depends entirely on your risk tolerance, your investment strategy, and your financial goals. Before you consider bitcoin as an investment, you should carefully consider your own goals and determine what you want to accomplish in your investment activities. Do you want to develop a passive income? Become a full-time investor? Save for retirement? Answering these questions will help you figure out whether bitcoin is the right investment option for you.
Bitcoin is a very high-risk investment because it’s a volatile asset. That means that bitcoin values may rise or fall dramatically in value over a very short period—even as quickly as a few hours or days.
Like all cryptocurrencies, bitcoin has no intrinsic value. It’s not backed by any physical asset, like gold or silver, and there’s no central regulator to ensure that the value remains stable. Furthermore, bitcoin value isn’t linked to the profits of any one corporation. The value of bitcoin is dependent on market demand. When there are more people buying bitcoin, the value will increase. When there are fewer people buying bitcoin, the value will decrease.
To make a significant profit on bitcoin, you may need to rely on “timing the market,” which is a difficult and generally ill-advised investment strategy. Nonetheless, there’s a potential for profit.
The Pros of Bitcoin Investing
The main benefit to bitcoin investing is that you may be able to generate a huge return on profit, perhaps as high as 200% or more. Of course, that’s an extremely difficult thing to accomplish, but it’s possible.
If you purchase a large amount of bitcoin, you may be able to capitalize on a market surge and sell your coins for a much higher value when there are lots of buyers. There’s also a slight possibility that bitcoin will truly become the currency of the future, or a more popularly-traded asset, and you could hopefully generate returns from long-term holdings. It should be noted, however, that bitcoin values are generally decreasing every year.
Your success may depend on properly “timing the market.” In other words, you’ll buy coins when they’re at a low price and sell them when they’re at highest possible price. High-risk investors who pay close attention to the market may be able to generate massive returns when employing that strategy. They might even generate returns that are highly improbable in the world of corporate stocks or government bonds.
The Cons of Bitcoin Investing
Unfortunately, the high volatility of bitcoin makes it an incredibly risky investment, and you could lose money if you’re not careful.
Bitcoin and other types of cryptocurrency are at high risk of “pump-and-dump” schemes. Predatory investors will reach out to amateur or unassuming investors and convince them to pour a lot of money into bitcoin. The resulting surge causes bitcoin prices to increase rapidly.
The predatory investors are smart and they sell all of their holdings before the buying surge ends, making a huge profit. But when investors stop buying, the value of the coins falls to extremely low prices. A coin bought for $200 could wind up having a valuation of just $30. The unknowing investors would be throwing their money away.
You could always make a profit by selling your coins before the price collapses, but it’s impossible to predict when the buying surge is going to stop—prices could fall 50% in only a matter of hours. That’s why any volatile asset, like cryptocurrency and penny stocks, are considered high-risk investments.
You should also know that pump-and-dump schemes and pyramid schemes are illegal. While it’s not necessarily illegal to capitalize on a market surge—whether it’s natural or artificially-created—you might not want to be associated with such practices. You could possibly be the target of an IRS audit or a criminal investigation, even if you’ve done nothing wrong.
Different Ways to Invest in Bitcoin
You can invest in bitcoin without actually purchasing any cryptocurrency. There are two different methods.
First, you can invest in a company that utilizes bitcoin technology. Although bitcoin is a risky investment, there are plenty of companies that are selling successful products that incorporate bitcoin and blockchain technologies. You can find several exchange-traded funds (ETFs) that include shares from a variety of blockchain-related companies, like the Amplify Transformational Data Sharing ETF (BLOK). You’re not directly investing in cryptocurrency but in corporate stocks of companies that utilize bitcoin. It’s safer and most ETFs in this category outperform the market.
Second, you can participate in bitcoin mining. Bitcoin mining is simply allowing your computer to be used as a node for the public ledger. It’s a topic that’s worthy of its own blog post, but you should know that bitcoin miners are rewarded with actual bitcoin for their contributions. You could receive free bitcoin without actually ever purchasing it.
Bitcoin Investment Strategies
If you do decide that you want to try bitcoin investing, be sure to heed the following tips:
Understand your risk tolerance: As mentioned before, bitcoin is a high-risk investment and you should carefully review your risk tolerance before you invest. If you don’t feel comfortable investing in volatile assets, or if you only have a small sum of money to invest, you may want to consider other investment options.
Diversify Your Portfolio: The best way to protect yourself from investment losses is to diversify your investment portfolio. Your primary investments should be low-risk, like government bonds or index funds. Next, you should go for medium-risk investments, like real estate or corporate stocks. High-risk investments, like penny stocks or bitcoin, should be your smallest and least-prioritized investments. Bitcoin is essentially the “icing on the cake:” the investment that could yield substantial profit, but which you could still do fine without.
Summary
Bitcoin is a popular type of cryptocurrency that utilizes a large chain of interconnected computers to store and protect your digital assets. Bitcoin is a highly volatile asset that’s prone to large and fast swings in value, which presents an opportunity for large returns but also poses a tremendous risk. If you’re going to invest in bitcoin, be sure to diversify your investment portfolio to protect yourself from the marketplace volatility.
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You want to know how to cash out bitcoin to your local currency and directly into your bank? This is arguably the only guide you will need to read to start cashing out or spending your cryptocurrencies like fiat starting from today.
In this guide we will be looking at seven (7) ways to cash out bitcoins and other cryptocurrencies you might have accumulated:
- One-on-One Transactions
- Cryptocurrency Exchanges
- Peer-to-Peer (P2P) Exchanges
- Crypto Loaded Prepaid Cards
- Crypto-Backed Loans on DeFi platforms
- Your Local Private Bank
- Over the Counter (OTC) Markets
These are practically the safest, fastest, and least expensive ways of converting your bitcoin and other cryptocurrencies to fiat.
Fiat refers to your government-issued physical currency.
How to Cash Out Bitcoin – Factors to Consider:
Your choice of which method to use in cashing out your cryptocurrencies may be influenced by:
- The ease and cost of cashing out your crypto.
- How you want the money – physical cash, bank deposit, or other forms of electronic money like PayPal.
- How soon or urgent you need the cash.
- The local currency and your government’s regulations regarding bitcoin transactions.
- The amount of bitcoin you want to cash out.
So, without much ado let’s examine in detail how to cash out your bitcoin and other cryptocurrencies to cash and directly into your bank account.
1. How to Cash Out Bitcoin in One-on-One Transactions
This is probably the fastest and least expensive way to cash out your cryptocurrency – cash out your bitcoin by selling it directly to another individual looking to buy the coins and get them to pay you in your local currency either by physical cash or bank deposit.
What do you need for successful one-on-one bitcoin cash-out transactions?
- Someone else who wants to buy bitcoin and willing to deal directly with you.
- Your ability to transfer bitcoin from your wallet to their wallet.
- The person’s ability to pay you the physical cash equivalent of your bitcoin.
This transaction can happen face-to-face in your living room, at a bar or restaurant in your neighborhood; and it can also be executed via text, chat, mail or other means of communication if the other person is not within the same geographical location as you.
However, you can’t do a long-distance transaction with a stranger –will you? NO. So this method is only workable when dealing with someone you know so well like your parents, siblings, spouse, colleague, and other close acquaintances.
2. How to Cash Out Bitcoin through Cryptocurrency Exchanges
Cash Out Bitcoin Directly to Bank from Exchanges
Several major cryptocurrency exchanges such asBinance, Kraken, Bitstamp, and Coinbaseto name a few have integrated fiat gateways that make it possible for their customers to transact between fiat and cryptocurrencies.
Binance, for example, has partnered with Advcash (Advanced Cash LTD) to make deposits and withdrawals of fiat currencies such as EUR, RUB, UAH, and KZT possible on their platform.
Coinbase also, –one of the most regulated and trusted cryptocurrency exchanges in the world offer a safe and convenient way to cash out your bitcoin to fiat on their platform; but first, you have to link your bank account or Credit and Debit Cards to the exchange and complete the compulsory KYC verification process –this is standard practice and requirement among all cryptocurrency exchanges that deal with fiat.
More so, in compliance with KYC and international Anti-Money Laundering (AML) regulations; most cryptocurrency exchanges will require you to verify your bank account by making a small “test deposit” before you can cash out bitcoin through their services and you may only withdraw to the same account that you deposited with.
It’s something you should take note of when trying to initiate crypto cash-out transactions.
How long does it take to get my money from Exchanges?
Let’s take Coinbase for an example.
- For US customers on Coinbase, withdrawals to the bank take between 1-5 business days (depending on the method used)
- For European customers withdrawals to your bank account via SEPA transfer generally takes 1-2 business days and 1 business day for withdrawals via wire transfer.
- UK customers can expect to get the money into their bank account within 1 business day.
- PayPal withdrawals are instant for US, Europe, UK, and CA, customers –check theCoinBase FAQfor daily payout limits
Please note that there are usually transfer fees and other charges you might incur for the withdrawals.
Check with the respective exchanges you use for the latest information on applicable charges and withdrawal policies.
One of the major advantages of using this method is that you can withdraw a reasonable amount of money based on the level of your KYC you have completed without much stress and they’re relatively safer.
More so, you can cash out several other supported cryptocurrencies on the exchanges along with bitcoin.
However, if you prefer a more anonymous and faster method of cashing out your crypto, then you may want to consider using peer-to-peer exchanges like Paxful and LocalBitcoins.
3. How to Cash Out Bitcoin Using Peer-to-Peer Exchanges
The most popular peer-to-peer exchanges you can use to convert your bitcoin to fiat are LocalBitcoins and Paxful.
These two popular bitcoin market places operate in almost all countries of the world so anyone reading this guide right now can access them and use their platform to cash out bitcoin to fiat and directly to their bank.
As the name suggests, Peer-to-peer exchanges provide the platform for individuals to trade bitcoin among themselves without involving a third party.
Peer-to-peer exchanges are mostly escrow-based with a transparent and straightforward fee structure.
These exchanges offer certain advantages which make them appealing to many cryptocurrency enthusiasts looking to cash out bitcoin:
- Peer-to-Peer exchanges offer greater anonymity.
- Peer-to-Peer exchanges offer users the ability to negotiate exchange rates.
- Peer-to-Peer exchanges offer greater speed
However, there’s a high possibility of getting scammed if you’re not vigilant –that’s just the basic draw-down of this option to cash out bitcoin -security is not top-notch like the regular cryptocurrency exchanges.
How Does Peer-to-Peer Exchanges Operate?
First, you need to open an account on any of the exchanges –for example, LocalBitcoins; then complete your profile setup and place a trade request to sell bitcoin.
You can specify your preferred payment method. Some of the payment options include:
Do You Need A Bank Account For Bitcoin Account
- Bank transfers
- Cash deposits
- Gift vouchers
- Skrill, Payoneer
- Western Union
- Neteller
- PayPal
- Mobile money
- Meet in person in your neighborhood and trade for cash settlement
Once you get a buyer, both of you can negotiate rates and then initiate the transaction. Your coins are locked in the escrow wallet until you confirm receipt of cash.
Neither you nor the buyer can access a coin that’s held up in escrow during a trade until the deal is successfully closed and if any problem arises along the line; the admins will step in to verify your claims and settle the dispute accordingly, based on evidence.
Make sure you’re trading on reputable peer-to-peer exchanges to avoid scams. The platform itself can scam users, so be vigilant and read exchange reviews before you move your funds there.
4. How to Cash Out Bitcoin Using Crypto Loaded Prepaid Cards
Crypto Loaded Debit Cards
The drive for crypto mass adoption has led to many projects introducing innovative products aimed at bridging the gap between crypto and fiat; thus making it super easy for ordinary people to be able to buy and sell cryptocurrencies easily.
One of such efforts to make the crypto to fiat conversion smooth and convenient for most users is Crypto Debit Cards.
The cards are preloaded with bitcoin and any other supported cryptocurrencies the issuing Company supports and can be used to withdraw your funds across millions of ATMs around the world or simply use for shopping on thousands of online merchant stores and in-store POS terminals that accept Visa or MasterCard worldwide.
Does this sound like a way to go in your search for how to cash out bitcoin to fiat?
Let’s examine the various Crypto Debit Card providers in the market, then you can decide which of them you will apply to get their card and start spending your crypto wealth easily.
Best Crypto Debit Cards:
Some of the best cryptocurrency debit card you can consider applying for include:
- Nexo Mastercard–access your money worldwide with zero foreign exchange fees. Monitor your transactions on Nexo Mobil App and enjoy 5% cash-back on all your purchases with the Nexo Mastercard.
- Coinbase Card–allows you to instantly spend the funds in your Coinbase account. Available to Coinbase customers in the UK, Spain, Germany, France, Italy, Ireland, and The Netherlands. The Card is useable anywhere that Visa payments are accepted.
- Wirex–One of the most established companies in the space with over 2 million customers and transaction volume of $2 billion.
- Revolut–Spend abroad with no fees.
- BitPay Visa Card– The BitPay prepaid Visa card is only available to US citizens and are globally useable everywhere Visa cards are accepted.
- MCO Visa–available in Singapore and over 30 US states and counting
- Bitwala–a secure card designed for global spending
This list is by no means exhaustive but they’re the top existing products in the market for you to choose from.
So what factors should guide your choice of a card?
- Is the card supported in your region?
- Is it user-friendly or full of complicated processes?
- How secure are the card and the issuing platform?
- Is the card reliable? Visa and MasterCard linked cards are more reliable.
- What are the fees structure and is this transparent? You wouldn’t want to SHARE your money with some crypto card Companies in the name of transaction fees.
- Does the card support multiple cryptocurrencies and fiat? How many fiat currencies does it support? Is it globally useable?
You will need to take your time and evaluate the various options and choose cards that provide the features that are most important to you.
Now you can carry your crypto everywhere you go with a smart crypto card.
5. How to Cash Out Bitcoin Using Crypto-Backed Loans on DeFi platforms
What if you never really need to cash out bitcoin?
What if you can spend all the cash your bitcoin is worth without actually selling your bitcoin?
What if you go on this spending spree and still enjoy any future price appreciation of the same bitcoin?
All these are made possible by Crypto-Backed Loans on DeFi platforms.
We can simply call them “crypto banks” or “blockchain banks” providing financial services on the blockchain.
Do You Need A Bank Account For Bitcoin
How does it Work?
- You deposit your crypto into the platform.
- You request a cash advance and the Company transfer the fiat into your bank account.
- Your deposited crypto is held as collateral for the cash advance.
- Once you pay back the money you collected, you get your coins back.
That’s just how simple it can get.
So what are the benefits of using this method?
- It’s a legit way of avoiding being taxed as you are not selling your bitcoin. You’re simply taking loans and loans are not taxable.
- You still enjoy any future appreciation in the price of bitcoin or whatever cryptocurrency you have deposited. If bitcoin was $10, 000 when you took the loan and when you come to pay it back the price had risen to $20, 000 your wealth just doubled even while you’re spending it –amazing.
Several companies providing this service including MakerDAO,Nexo,EthLend,Salt, and many others in the market.
As is always the case, review the platforms carefully before depositing your bitcoin.
6. How to Cash Out Bitcoin Using Your Local Private Bank
Cash Out Bitcoin Through your local bank
If you are trying to cash out bitcoin worth millions of dollars, you will find that going through a private bank may be the best choice for you.
The bank can help you facilitate both the sale as well as the movement of the fiat equivalent to your desired destinations.
More importantly, why you may want to consider using a private bank is that you will get more professional help with receiving your funds without getting your account frozen due to heavy and sudden cash flow.
7. How to Cash Out Bitcoin Using Over the Counter (OTC) Markets
Do You Have To Have A Bank Account For Bitcoin
A certain volume of crypto transactions is simply not possible with any of the aforementioned options and that brings us to the last item on the list of ways to cash out bitcoin –Over the Counter (OTC) Markets.
What are OTC Markets?
Over-the-counter markets are avenues for participants to trade directly between each other, without the use of a central exchange or other third parties.
In practice, traders in an OTC market really don’t trade directly with each other but goes through what we call OTC desks or exchanges.
OTC desks are maintained by some of the major exchanges such as Binance, Coinbase, and Circle to accommodate traders who are willing to sell large amounts of coins, like miners or early crypto investors who have accumulated millions ad even billions of dollar worth of coins.
More so, there are crypto millionaires and billionaires looking to buy crypto without using the public exchanges.
You can cash out bitcoin worth millions of dollars by approaching any of the popular OTC market providers and negotiate rates with them.
They have been known to facilitate the large volume of crypto transactions this few years and so far remains the top place to cash out a large amount of coins anonymously and securely.
If you think the OTC market is free of scammers –you’re wrong. The big scammers – like hackers operate here and the same caveat “beware of scammers” applies in this market too if you don’t want to lose huge.
On a Final Note
There we have it –seven (7) ways to cash out bitcoin. As the cryptocurrency industry matures, better and more advanced means of converting your crypto wealth to cash are being developed and released into the market.
Spending your cryptocurrency shouldn’t be a difficult process and we hope that with this guide you find at least one method that works just fine for you –balancing anonymity with security and speed.
Always speak with your lawyer, banker, and other relevant experts when large amounts are involved so you don’t fall on the wrong side of the law or worse –get scammed of your crypto money.
What other ways do you cash out bitcoin to fiat and bank? Share with us in the comments section below.
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