Getting out of the market is not as easy as it seems. There are several options, but each has its own pros and cons.
Sergey Wart, co-founder and CEO of the Cereal Finance project, spoke especially for topplabs.org about all possible ways to exchange fiat money for cryptocurrencies and vice versa.
Until cryptocurrencies are on a par with national ones, their holders (which have become noticeably larger since December last year) need fiat money. Since financial regulators are still skeptical about free conversion, the issue of withdrawing large amounts from cryptocurrencies to fiat is relevant. I'll tell you about the popular ways of exchanging cryptocurrencies for fiat money with all their pros and cons.
For a person who is trying to sell or buy cryptocurrency for the first time, this method may seem the most obvious – ads can often be found even offline.
Public exchangers in different periods operated in Moscow and even in some regions. They offer services for buying cryptocurrency or fiat money right at their offices.
There are also closed exchangers in Moscow. Transactions through them work like this: you make an appointment in advance in a guarded office or apartment, fix the course, they prepare money for you, you transfer cryptocurrency and wait for confirmation. After that, you can pick up fiat.
It looks like a real exchanger. From the outside, settlement in a closed exchanger is similar to visiting classic exchange points – the process is debugged, everything is clear to the consumer.
The client is not protected. When dealing with private crypto exchanges, people usually don't know who they are dealing with. Therefore, there is a high probability of being left without money and without cryptocurrency.
High commission. The commission of some crypto exchanges reaches 15%. At the same time, their work sometimes comes down to mediation between the buyer and the virtual crypto-exchange. That is, they take money for an action that the user can perform himself.
This method of withdrawing cryptocurrency into fiat money is suitable for people who do not like to dive into details and are ready for a certain risk.
Cryptocurrencies and blockchain are more than technology or financial instruments. They unite around themselves enthusiasts – developers, investors and experimenters. On the Internet, you can find a community to your liking, and offline whole cryptocommunities open, conferences and meetups are held.
The crypto group has its own chats, the participants of which are familiar with each other in real life. One of the "eternal" topics here is buying and selling cryptocurrencies. Someone says in the telegram chat: "Selling 2 BTC at Bitfinex +1" – this means that a person is ready to sell two bitcoins at the Bitfinex exchange rate at the time of sale for a commission of 1%. The participants in the transaction agree on the terms of the exchange – in cash or to a bank card – fix the rate, and the owner of the cryptocurrency transfers the agreed amount to the buyer to the wallet.
Security. The most obvious benefit of sharing with friends is the guarantee of honesty. This, of course, is not about one hundred percent guarantee. For example, last year a man appeared before a New York court who stole $ 1.8 million from his friend on the air, threatening him with a pistol. However, if you personally know a participant in the transaction and he has a good reputation in the community, the likelihood of fraud on his part is still low.
Fluctuations in commissions. To date, the commission for buying from “friends” does not exceed 2%. Most often, you can find ads with a commission of 1% or even "zero". However, during periods of Bitcoin growth, deductions reached 5%. While the currency's gains have more than offset the losses, this does not negate the volatility in personal settlements.
Unequal position. It is important to remember that a cryptocurrency transaction, unlike a bank transfer, cannot be reversed. Therefore, in the event of a conflict, it is easier for a fiat seller to return their money than for a crypt holder.
An acquaintance buying and selling is a good way to "enter fiat" if you really know the other party to the transaction. One way or another, the precautions will not hurt, and it is better to receive cash before transferring the cryptocurrency.
Another way to exchange currency with another person is through P2P exchanges like LocalBitcoins. On such platforms, advertisements for the purchase or sale are posted. Buyers can negotiate a deal and set their own terms. As a rule, offers here look like this: “Selling 1-10 BTC. Withdrawal to Yandex.Money or Qiwi ". Upon reaching an agreement, the parties make an exchange, and the platform takes a commission for each transaction.
Simple and fast. The operation of such exchanges is based on an understandable mechanism for exchanging and withdrawing money. In addition, the choice of a fiat money or cryptocurrency seller is not limited to a few crypto exchanges in the city or telegram chat participants.
Security. Some P2P exchanges use escrow accounts – the seller's money is held until the buyer receives the cryptocurrency.
Security. Paradoxically, this type of exchange is both safe and unsafe at the same time. Bank transfer in the case of P2P exchanges can be canceled. Let me remind you that such a trick is impossible with cryptocurrencies.
Uncertain legal status. Some P2P exchanges are blocked in Russia. This creates an additional difficulty in the free exchange and protection of their rights.
P2P exchanges are suitable if the transaction needs to be completed as soon as possible and no one of your acquaintances was able to reach an agreement.
One of the most "civilized" and popular ways to exchange cryptocurrency for fiat and vice versa is professional cryptocurrency exchanges. In this case, you are only dealing with the platform – not with other users. Fiat money can also be withdrawn to a bank account.
Popularity. The largest number of transactions is carried out on centralized crypto-exchanges. This eliminates the need for buyers to waste time looking for a seller.
Transparency. Many cryptocurrency exchanges disclose the details of their activities – they provide information about the management company, the location of the servers, and so on.
Registration required. On most centralized crypto exchanges, it is necessary to go through banking identification procedures – KYC and AML.
Vulnerability. Exchanges are popular and concentrate a large amount of cryptocurrency. But there is also a downside – increased attention from hackers and asset vulnerability. Exchanges periodically hack and steal millions of dollars worth of cryptocurrency. Such incidents even affect the bitcoin rate. In addition, cryptocurrency exchanges experience failures even without the intervention of hackers – for example, during the moments of active trading. Yahoo Finance columnist Rick Newman told about his negative experience of withdrawing funds from the exchange – he was unable to access his account several times within one week.
Centralized crypto-exchanges are the choice of the majority, but I still advise you not to keep all your savings on one exchange and, if possible, withdraw the crypto to "cold wallets" – to a platform without Internet access.
OTC providers are OTC agents who match a buyer to a seller for a commission. Traders usually negotiate the purchase and sale of large amounts. This type of OTC trading is on the rise now. It is aimed at large investors who prefer to use the services of a trusted broker or intermediary to complete transactions instead of independently participating in exchange transactions. Although some brokers publish their portfolios, it is almost impossible to accurately estimate the volume of OTC trading. Some centralized crypto exchanges are creating OTC trading tools to attract institutional investors.
They do everything for you. The broker relieves the buyer from the need to understand the exchange mechanisms.
No restrictions for large investors. Centralized crypto-exchanges have restrictions on the amount of funds available to investors. OTC transactions solve this problem and also allow you to bypass local bans on cryptocurrency trading in some countries.
Not available to everyone. Brokers, as a rule, take on transactions worth at least $ 50,000.
Unsafe. In OTC transactions, all information is in the hands of one person or organization. This is fraught with data leaks for fraudulent schemes. Having information about sellers of large volumes of fiat or cryptocurrency, attackers can contact them and pose as intermediaries, and then disappear upon receipt of funds.
OTC brokers are obviously suitable for large investors who want to avoid not only learning all the technical nuances of cryptocurrency trading, but also volatility. Brokers are guided by the exchange, but in large transactions, the rate is still known in advance – neither of the parties expects any surprises during the exchange.