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Say i was to have 100,000 dollars worth of bitcoin in my wallet and i want to cash out, where does the money i am receiving come from? Is it taken out of the volume amount of dollars currently in circulation or can you only get paid out if someone is willing to buy it?

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You would need to find someone to buy the bitcoins from you. Simple as that!

You can do this in person (probably with someone you trust if its $100k!), or through an online exchange (a service that matches up buyers and sellers).

  • So until you can sell all of your bitcoin you cant cash out? – Paul Bavisotto Dec 16 '17 at 8:10
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    You can cash out part of your bitcoin if you'd like. You should think of bitcoin like an object that you own (even though it is digital, it is scarce). It would be the same sort of situation if you had a collection of silver coins: in order to 'cash out' you would need to find someone to buy them from you. That person could buy all of them, or half of them, or whatever you both agree upon. Until you make that sale, you don't own cash, you own the coins. – chytrik Dec 16 '17 at 8:35
  • Note that common exchange sites hide this fact for you. Many support selling or buying at a spot price – Pieter Wuille Dec 16 '17 at 9:30
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In order to sell, there must be a buyer. In fact, the whole statement

Say i was to have 100,000 dollars worth of bitcoin in my wallet

Is also partially incorrect, because X amount of BTC are worth X BTC. The USD value exists only at the point you exchange your BTC for USD. And in order for that to happen, you need to give your BTC to someone, and that entity will give you the amount of USD that you agreed upon.

In fact, your X amount of BTC doesn't even have a fixed USD value. Depending on which party (generally exchange) you use to convert BTC to USD, you may get a different value. Just look at the Price that BTC has right now on the various different exchanges.

If you are wondering why prices are so different, is because (going back to the original sentence) in order to sell you need a buyer: in order have an USD value you need to sell to someone, and the value of your BTC is whatever value you agree to sell and the counterpart agrees to buy.

Having said that, this is actually easier than what you think to find a buyer. The simplest way is to use an exchange that will act as an intermediate between you and the rest of the (buyer) world. At any point in time, there are buying orders for a specific price, and you can sell your BTC almost instantly as long as you agree on the ASK price.

You can also decide to set your own price, and the transaction will be finalized when a buyer agrees on your price.

Long story short, you will only get your USD when you will sell (exchange) your BTC for USD.

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