What happens to cryptocurrency once it is converted back into fiat currency?

Usually, there is someone else, who wants to do the reverse transactions, i.e., provide fiat and get cryptocurrency. So an exchange would try to pair match you two.

In the scenario where the trades are not even, it will keep on trying to match you up to other traders until your trade is completed, and the cryptocurrency is taken away from you and is now owned by others. In return, you have your fiat balance.