How To Sell Bitcoins

In 2013, I bought a few Bitcoins from a dude in a coffee shop, paying with hundred-dollar bills. Later that year I sold enough to get my money back. Then I forgot about them, Bitcoin’s price gyrations occasionally registering in a corner of my mind. But earlier this month I decided to find out if the remainder could be turned into real actual money, and it turned out they could. Here’s how.

Important note: This narrative applies specifically to exchanging BTC for Canadian dollars, in Canada. Some lessons may apply in other jurisdictions.

How I did it · There are a lot of people out there on the Net who are eager to sell you Bitcoins, but when you want to sell them back for hard cold cash, the offerings seem to thin out. If you’re in the States and go poking around, Coinbase often seems to come up top of the list. And in fact, when I publicized the fact that I was looking to sell, a few people pointed me at Coinbase.

Having said that, a lot of the names that would have turned up if you’d done the same research three years ago have left the stage, some in colorful circumstances, often leaving stakeholders’ digital wallets empty. So you want to be careful.

When I originally bought my digital cash, the Bitcoin-community dude who took my hundred-dollar bills recommended Blockchain.info as an online wallet provider, and I second the recommendation. They never surprised nor disappointed me, and I was pretty impressed with the quality of their clients and the seriousness of their security posture. In the unlikely event that I decide to go back into cryptocurrency, I’d use them again.

I quickly discovered that the most visible US buy/sell services don’t really extend across the 49th parallel. I was casting about, looking at Canadian operators, and getting kind of depressed because the whole territory is more than a bit on the sketchy side, and objective evidence that This Will Work For You is hard to come by. Then, one day at work, I overheard a conversation involving Jonathan, a colleague who’s buying a house, and he said “Yeah, I cashed in my Bitcoins to help with the down payment.” Which got my attention right away; I asked him how and who exactly, and he said he’d used Coinsquare.

Tl;dr: It worked. And here’s what I think is an important lesson: Whatever your cryptocurrency circumstances may be, if they involve real money, the best thing you can do is find someone you know personally who has done whatever you’re trying to do, and follow a well-blazed trail. And, I’d add, follow it quickly; because while it might work today, in the world of Bitcoin, who can say whether it’ll work tomorrow?

Details · When I want to try something new, I appreciate a step-by-step guide, so here you go:

1. I set up a Coinsquare account. Other operators I’d investigated had elaborate and painful setup requirements, including FAXes and notaries and so on. Coinsquare offered “instant approval” and when I gave them a bunch of salient facts about myself, they came back after a couple seconds’ latency and said “OK, you’re approved.”

2. I initially funded the Coinsquare account with a $100 bank transfer. I just wanted to verify to my satisfaction that my bank and Coinsquare could talk to each other. A repeating pattern first became obvious here: My $100 showed up in Coinsquare as $95. On this and every subsequent transaction, the intermediaries leaned in and took a cut.

3. I transferred 0.1BTC from Blockchain.info over to Coinsquare; the BTC-ecosystem charge for this was tiny and felt appropriate, and they showed up in my account at Coinsquare way faster than I expected.

4. I converted almost all the BTC to Canadian Dollars (CAD). I was a little troubled when Coinsquare rejected my 0.09BTC transaction as “too large”, but it accepted an 0.05BTC sale immediately followed by another of 0.04BTC.

5. I requested a transfer of most of the output (roughly C$2,000) to my bank account, to establish that channel worked. Anyone who has transferred money between financial institutions knows the drill: The funds vanish from your account within microseconds of you pressing “Confirm”, then the sending institution sits on them for as long as they’re legally allowed to, then they do the actual transfer which takes another microsecond or two, then the receiving institution sits on them for as long as they’re legally allowed to, and then, some days later, the money lands in your account, often smaller than when you sent it, because “Service Charges”. In this case, my C$2K turned into C$1980. Damn, have I mentioned how much I love the finance industry?

6. I poked around on Coinsquare and discovered their “wealth management” service, apparently aimed at high rollers, which had an attached email address, so I sent them a note saying “I want to sell quite a bit more than 0.1BTC for CAD, can you actually do this?” Almost immediately, the “concierge service” got back to me, saying “Transfer in the Bitcoin and we’ll give you a quote that’s good for ten minutes.” So I did, and they did (at several percentage points off the then-advertised price of Bitcoin), and I took it, and almost instantly, Coinsquare informed me that my account there contained a pleasing number of Canadian dollars.

7. I fired off another wire-transfer request, and after the usual multi-day delay, and with the usual slight diminution in value, I had substantially left behind the role of “cryptocurrency investor”.

Elapsed time: About ten days.

Obviously, I was somewhat annoyed by the succession of grasping digital hands that reached into my digital wallet to extract their digital percentage every time I asked them to update a couple of fields in a database somewhere. But on the other hand, since I was selling the BTC for roughly sixty-four times my acquisition price, and I really wanted to get out of the market, I decided to go with the flow, as in the flow of dollars out of my crypto-pocket.

But I have to say, buying and selling cryptocurrencies is a good business to be in; I haven’t added up the numbers, but Coinsquare and my bank both got paid pretty well for doing some routine database updates.

Why I did it · I love Bitcoin. It is one of the most intellectually elegant constructs I have encountered in my decades in the computing profession. The system has multiple moving parts that work together, doing multiple different difficult things, to accomplish an effect that looks like it ought to be very useful. Whoever Satoshi is or was, I hope he she or they are still alive, sitting on a beach somewhere and enjoying their craftily-gotten gains.

But Bitcoin has descended into bad craziness. You can’t actually use it as money, because money needs to have a somewhat stable and predictable value. Also, its current global blockchain can only do a few transactions per second, so it obviously can’t underlie more than a tiny sliver of any commercial ecosystem.

Those who currently buy it are making the classic “Greater Fool” bet, i.e. that it’ll keep going up because it’s been going up, and some greater fool will come along and take it off their hands. This kind of bet can run much longer than anyone thinks is reasonable, but then someday the music stops and most players won’t find a chair to sit on.

Also, the concentration of Bitcoin ownership is worrying: Check out this story, and accompanying graph, over at ZeroHedge. You can bet that if (I mean when) Bitcoin deflates, the loss is going to be mostly soaked up by the people who’ve bought in recently, the 95%-plus of holders who collectively own less than 5% of BTC. What the graph doesn’t illustrate is the proportion of real non-crypto money that the 95% have injected into the market, and stands to be lost. I bet the answer is “most of it”.

To go all nerdy, I think that cryptocurrencies have a bright future, when transactions are based on something more scalable than proof-of-work, and when they are driven by a killer app that does something useful out of the box. One example might be Ripple.

Closing thoughts · I’m going to have to pay tax on this. Fortunately, since it’s a capital gain, the Canadian tax treatment should be favorable. But there may be bureaucratic difficulties, I have no idea how comfy the Canadian taxman is with this sort of thing.

If you’re in Bitcoin, now’s a good time to take money off the table. Yeah, who knows, it might go up a whole lot more, but then again it might not, and it would be totally unsurprising if there were a catastrophic deflation next Tuesday. And I’ve rarely met anyone who really regretted selling financial assets at a substantial profit.

Here’s the second important lesson: You can probably sell your Bitcoins, but you probably can’t sell them fast. So now might be a good time to start.

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