The most common way to get bitcoin is to buy it through a cryptocurrency exchange, where you can purchase any amount using a bank account, debit card, or wire transfer. You can also use a Bitcoin ATM, receive bitcoin as payment, or earn it through mining, though each method comes with different costs and trade-offs. Here’s what you need to know about each option and how to set yourself up safely.
Buying Bitcoin on an Exchange
Cryptocurrency exchanges are online platforms where you create an account, deposit money, and buy bitcoin at close to the current market price. They’re the most popular option because they’re straightforward, relatively low-cost, and available on your phone or computer.
To sign up, you’ll need an email address, a government-issued ID, and usually a selfie for identity verification. Most exchanges verify your identity within minutes, though it can occasionally take a day or two. Once verified, you link a bank account or debit card and place a buy order. You don’t need to buy a whole bitcoin. You can purchase a fraction, sometimes as little as $1 worth.
Fees vary by platform. For beginners using the simple buy interface (rather than the advanced trading view), expect to pay a trading fee plus a spread, which is the markup built into the price you see. Here’s what the major exchanges currently charge on beginner purchases:
- Coinbase: 0.84% trading fee plus about 1% spread
- Kraken: 1% trading fee plus about 1% spread
- Crypto.com: 0.8% trading fee plus about 1% spread
- OKX: About 1% spread with no separate trading fee
- eToro: 1% trading fee
On a $500 purchase, that means you’d pay roughly $5 to $10 in fees depending on the platform. Most exchanges also offer an “advanced” or “pro” trading interface with significantly lower fees, sometimes under 0.5% total. It’s worth switching once you’re comfortable with the basics.
Setting Up a Bitcoin Wallet
When you buy bitcoin on an exchange, the exchange holds it for you by default. That’s fine for getting started, but many people eventually move their bitcoin to a personal wallet for more control. A wallet stores the private keys that prove the bitcoin belongs to you. If you keep everything on an exchange and that exchange gets hacked or freezes withdrawals, your bitcoin could be at risk.
There are two main types of wallets. Software wallets (sometimes called “hot wallets”) are apps you install on your phone or computer. Hardware wallets (“cold wallets”) are physical devices that keep your private keys offline, making them harder for hackers to reach.
Software Wallets
Download the app only from the official website or your phone’s app store. Never use third-party download links. When you open the app and create a new wallet, it will generate a recovery phrase, typically 12 to 24 random words. This phrase is your backup. If your phone breaks or gets stolen, those words are the only way to restore access to your bitcoin. Write them down on paper and store them somewhere safe. Do not save the phrase in a screenshot, a notes app, or cloud storage.
After recording your recovery phrase, set up a PIN or biometric lock. Then tap “Receive” to see your bitcoin address, a long string of characters or a QR code. That address is what you’ll paste into the exchange’s withdrawal screen to send bitcoin to your wallet. Send a small test amount first to make sure everything works before transferring a larger balance.
Some newer software wallets skip the recovery phrase entirely and use alternative security models. For example, certain apps handle key management through multi-party computation and rely on biometric verification instead. You still need to complete the app’s recovery setup so you can regain access if you lose your device.
Hardware Wallets
Devices from manufacturers like Trezor and Ledger cost roughly $60 to $180. During setup, you generate a recovery phrase and store it offline, just like a software wallet. The key difference is that your private keys never leave the physical device. When you want to send bitcoin, you plug the device into your computer or tap it to your phone and confirm the transaction on the device itself. This makes hardware wallets significantly harder to compromise remotely. They’re worth the investment if you’re holding more than a few hundred dollars in bitcoin.
Using a Bitcoin ATM
Bitcoin ATMs are kiosks, often found in convenience stores and gas stations, that let you insert cash and receive bitcoin sent to your wallet address. They’re convenient if you want to pay with cash or skip the process of linking a bank account to an exchange, but the fees are steep.
The median Bitcoin ATM fee is approximately 16% on purchases, according to a Federal Reserve Bank of Kansas City analysis. Some machines in competitive areas charge 8% to 10%, while others in less competitive markets charge 20% to 25%. On a $200 purchase at 16%, you’d lose about $32 to fees and receive only $168 worth of bitcoin.
Most ATM operators use tiered identity verification. A phone number alone might let you buy up to $999, while larger purchases require a government ID or additional documentation. Some operators require full identity verification for every transaction regardless of the amount. You’ll also need a bitcoin wallet address ready before you start, since the machine sends bitcoin directly to your wallet.
Other Ways to Get Bitcoin
You can receive bitcoin as payment for goods or services. If you freelance, sell products online, or run a small business, you just share your wallet address or QR code with whoever is paying you. The bitcoin arrives in your wallet within minutes, and the transaction fee paid by the sender is typically under a dollar for standard transfers, though it fluctuates with network demand.
Peer-to-peer platforms let you buy bitcoin directly from another person rather than from an exchange. These platforms connect buyers and sellers and often hold the bitcoin in escrow until payment is confirmed. This can be useful in regions where major exchanges aren’t available, but you’ll want to use a platform with a reputation system and escrow protection to avoid scams.
Mining, the process of using specialized computer hardware to validate bitcoin transactions and earn new bitcoin as a reward, is technically still possible but no longer practical for individuals. The equipment costs thousands of dollars, consumes significant electricity, and competes against massive industrial operations. For most people, buying bitcoin is far simpler and more cost-effective.
What the IRS Expects You to Report
Every federal income tax return now includes a yes-or-no question about digital assets. The good news for buyers: if you only purchased bitcoin with U.S. dollars and didn’t sell, trade, or otherwise dispose of it during the year, you check “No.” Simply holding bitcoin in a wallet or transferring it between wallets you own also doesn’t trigger a “Yes” answer, unless you paid the transfer fee using bitcoin itself (that counts as disposing of a digital asset).
You check “Yes” if you sold bitcoin for dollars, traded it for another cryptocurrency, used it to pay for goods or services, or received it as payment, a reward, or through mining or staking. Any of those transactions must be reported on your return whether or not you made a profit. If you bought bitcoin for $500 and later sold it for $400, you’d still report the sale, though the $100 loss could offset other gains.
Exchanges typically provide transaction records you can download at tax time, making it easier to track your cost basis (what you originally paid) and any gains or losses. If you use multiple platforms or wallets, keeping your own spreadsheet of purchases, sales, and transfers will save you a headache later.
How Much You Need to Start
There’s no meaningful minimum. Most exchanges let you buy as little as $1 or $2 worth of bitcoin. ATMs sometimes have minimums around $20. You don’t need to buy a whole coin, which would cost tens of thousands of dollars. Bitcoin is divisible to eight decimal places, so you can own a tiny fraction. Starting with a small amount you’re comfortable with is a reasonable way to learn how wallets, addresses, and transactions work before committing more money.