As the prices of bitcoin and many altcoins have been growing recently, lots of investors are likely considering when to take profits. However, just as important as determining when to cash out a portion of your position is knowing how to do it. In this article aimed at crypto beginners, we consider just that.
Plan How to Convert Crypto Before Investing!
Cryptocurrency markets are highly volatile. As we’ve seen over recent weeks, short-term price changes can surprise even veteran traders. You could wake up one morning to discover that your investment has suddenly reached the target at which you were planning to cash out.
Since the price can move dramatically in both directions, it’s important to know how to cash out ahead of time. For that reason, it’s best to familiarize yourself with the process before even investing. This will allow you to move quickly if the price hits your targets.
USD or Stablecoin?
When determining how to cash out, you should consider whether you want to leave the market for just a short period or take profits to spend in your day-to-day living. This might dictate which cryptocurrency exchange you end up using.
If you’re leaving the market in anticipation of a better entry point at a later date, you might not want to convert your holdings to US dollars at all. Instead, it might be more convenient to trade your investment for a stablecoin like USDT or USDC while you are waiting for the reversal.
Alternatively, if you take profits to spend on goods or services that can’t be bought using cryptocurrency, you’ll need to choose an exchange that allows for crypto-to-fiat trading. There should also be provisions in place to actually withdraw the dollars you receive to a bank account.
How to Exchange Cryptocurrency for USD or USDT
Whether exchanging cryptocurrency for US dollars or a stablecoin, the steps will be largely the same. In the former case, you’ll need to use an exchange that supports fiat withdrawals. Meanwhile, in the latter, you can use a crypto-to-crypto platform. The process is as follows:
- Register an account at the exchange platform that offers the functionality you require. In the case of fiat-to-crypto, this might involve submitting identification documents.
- Find the option to deposit cryptocurrency to the platform.
- Copy the deposit address and paste it into the wallet from which you’re sending funds. It’s crucial that you check the address carefully and make sure you send only the correct type of cryptocurrency to the address. Mistakes here can result in permanent loss of funds.
- Enter the amount of cryptocurrency you wish to trade for USD or a stablecoin.
- Hit “Send” and wait for the transaction to confirm. You can use a blockchain explorer to keep track of your transaction’s progress.
- Once your transaction arrives, you’ll need to exchange the received crypto for either USD or a stablecoin. If the cryptocurrency you’re trading is an obscure one, this may require you to first trade it for bitcoin and then, for USD or a stablecoin. If it’s a popular crypto, there will probably be the option to trade it directly for fiat or a stablecoin.
- The easiest and quickest way to exchange it is by using a market order. This will fill the order immediately. However, if the cryptocurrency you’re exchanging has a very thin order book, you might prefer to use a limit order to avoid price slippage. Ignore this point if you’re trading from or to those cryptos with the largest market capitalizations.
- If you want to withdraw fiat currency, you’ll then need to request a withdrawal via the exchange platform. This will likely involve registering your bank details or another payment method.
