Table of Contents
Introduction
With market prices swinging back up again this year, you may want to convert crypto to cash at some point in 2023. The cryptocurrency market is back in the green as we round out the first quarter of 2023. After a long and frigid crypto winter last year, prices for crypto coins, tokens, and non-fungibles are blowing up again. Bitcoin started off the year at
Sky-high crypto prices to start off 2022 tumbled precipitously last year as one major crypto bank or exchange after another collapsed into insolvency. The rapidly shrinking exchange market value of the deeply overbought crypto market pushed firms into insolvency that had the weakest business models and balance sheets. Their collapses in turn shook confidence in the cryptocurrency industry and sent prices falling lower in a vicious cycle.
This year’s relief rally has gone on long enough to look promising as a full recovery rally with more upside ahead if all things go well with the global economy’s macro factors and the crypto industry’s remaining players. The robust volume, sustained action, and various bullish characteristics of this rally are strong indicators that all of last year’s string of insolvencies among crypto firms are now fully priced into the global exchange market for crypto.
Depending on what goes on with crypto prices for the remainder of the year, and how it all aligns with the relevant position, strategy, and timeframes of your personal or business finances, you may want to convert crypto to cash in 2023.
1. Best Way to Convert Crypto into Cash in 2023 is Don’t! Hodl! Wait until 2030
So this is kind of a non-answer answer (don’t worry, I’ve outlined how to convert your crypto to cash below if you really must).
But because of the kind of long-term investment opportunity crypto represents, it may be remiss not to forewarn any readers that it’s still very early in the crypto industry’s growth and that most crypto investors see significant upside to holding over the next decade.
Imagine you had bought $100 each of Facebook, Amazon, Apple, Google, Microsoft, Netflix, or Tesla stock when they were still new. If you had held onto your shares instead of converting them to cash, any of these stocks would have delivered you life-changing ROI just for holding your shares instead of selling them. While that window has closed for these stocks, crypto is poised to be the next great, big success story of the high-tech industry.
2. If You Must, Here Are Some Ways to Cash Out Your Crypto
Convert your crypto to cash will require different methods depending on how your crypto is held. The key is to get your coins or tokens into a crypto exchange or brokerage like Coinbase or Binance that changes independent digital currencies for cash.
Then you can redeem cash for your crypto from one of these services and withdraw the cash to your connected bank checking account. What you will need to do is sign up for an account with one of these exchanges or brokerages if you don’t already have one. Because of Know Your Customer and Anti-Money Laundering regulations, you will probably need to furnish proof of identity like a state-issued driver’s license or ID to get your account started.
Alternatively, you can also find someone to sell your crypto to by sending it to their wallet in exchange for cash payment by whatever means you can both manage. Some services to help you find a buyer for your crypto if you choose to sell it are Paxful, CoinMama, and LocalBitcoins. You may also want to use a crypto portfolio tracker so you know exactly how the sale of your crypto affects your entire portfolio.
3. Don’t Forget to Keep Records of Crypto Sales and Report Them on Your Tax Filing
When you sell any personal property for cash, the money you receive is regarded as income and must be reported to the IRS (U.S. Internal Revenue Service) if you are a U.S. resident or citizen who files an income tax report and pays taxes.
The IRS regards cryptocurrency as personal property and any sales of crypto for a profit trigger a capital gains income reporting requirement that may increase your tax obligation for the year (or period if you file and pay income taxes quarterly).
To ensure accurate reporting, when you sell your crypto you must go back through your records and find the USD value of your crypto at the time you originally purchased it. That is called your “Cost Basis,” and you use that to calculate how much you gained or lost from that purchase when you sell your crypto.
If you sold your crypto at a profit, that is called a Capital Gain. Income taxpayers in the United States are required to report capital gains as part of their income. Alternatively, if you convert your crypto to cash at a loss, you can write off your capital losses from the sale as a tax deduction, lowering the total income amount you are required to pay taxes on for the year.
