Your First Bitcoin Buy

Howdy y'all! This post is intended to walk you through buying Bitcoin for your first time. No fluff, and any jargon I use, I will explain as clearly as possible. Let’s get after it!

Buying Bitcoin: The Step-by-Step

The simplest way to buy Bitcoin is through a centralized exchange. Think of it like an online store where you swap your cash for crypto. You can also compare it to something like the New York Stock Exchange, except in this case its a business that "exchanges" cryptocurrencies instead of company stocks. We use the word "centralized" to imply that a company owns, operates, and generally oversees the exchange to ensure all trades go through without issue. This is opposed to a "decentralized" exchange, a type of exchange where you interact with smart contracts (computer code) to exchange your crypto instead of going through a middleman -- this type of exchange is completely unique to crypto! We'll save that topic for a different article.

There are some downsides to consider when buying through a centralized exchange, but most of them are overshadowed by the simplicity of it, especially for your first few purchases. For now let's operate using the easiest method.

Step 1: Pick Your Exchange

First, you need to choose which exchange you want to purchase from. There are a bunch out there, but stick with the big names that are well established. In the US, your options are primarily Coinbase and Kraken. I'm simplifying this as there are many other exchanges operating in the US (Crypto.com, Binance US, Bitstamp, Gemini, etc.), but I'm simplifying for a good reason. Coinbase and Kraken are the two institutions that have been around the longest and have built a dependable reputation. For this article, I'm going to use Kraken. They have a long history in the US and are known for having better customer service and lower fees than Coinbase.

Step 2: Set Up an Account

1. Navigate to www.kraken.com and click "Sign Up" at the top right.

   
   

   

   Sign-up page for Kraken. Make sure to create a very strong password -- do not reuse a password you use somewhere else or make variations on a word/password you've already used.

2. Follow the directions to create an account. Make sure to enter a VERY strong password. Crypto is not the space to be reusing old passwords or making variations on passwords you already have.

3. Continue through the flow to verify your identity. Exchanges are required to gather Know Your Customer (KYC) information in order to legally operate in the US. This will require you to provide some personal information (as well as documents proving this information, typically your driver's license or passport) and ask a couple of questions concerning how you intend to use the platform. KYC verification might take a few hours to a day—be patient, it’s a one-time thing.

   
   

   

   KYC (Know Your Customer) information is required for all exchanges operating in the US.

4. Now, you'll get to pick which version of Kraken you want to use. We're going to use the simplified version of the application for the first purchase, but in the future you'll likely want to use the more advanced version. For now, select "Go to Kraken" (as opposed to "Go to Kraken Pro").

   
   

   

   For beginners in the space, it's best to start with Kraken as opposed to Kraken Pro. The interface is straightforward and much easier to navigate.

5. Finally, setup Two Factor Authentication (2FA). Click your profile in the top right (likely your initials) and click "Security". Scroll to the Sign-in Two-Factor Authentication (2FA) section and click "Add Authenticator App".

   1. You'll need to either download an Authenticator application, like Authy, or if you're on iOS, Apple now offers a built-in 2FA application called "Passwords". Scan the QR code Kraken gives you and then enter the code from the 2FA app. If you're not familiar with what 2FA is, you can read more on it here: https://www.simplilearn.com/tutorials/cyber-security-tutorial/what-is-two-factor-authentication

      
      

Step 3: Fund Your Account

With your account created and your KYC details verified, you’ll now need to add some USD to buy Bitcoin with. Kraken makes this pretty straightforward.

1. Choose “Transfer” from the menu options on the left.

2. You'll see a Deposit section with an Asset dropdown and a Deposit Method dropdown. Select "US Dollar" under Asset and select "Linked Bank Transfer". Finally, click "Add new account".

   - There are other deposit methods you can pursue, but I highly recommend linking your bank. This allow you to use ACH as your method of transfer, a free and relatively fast method for funding your account. You can use a debit card, or do a manual wire transfer, but these methods have fees associated with them.

   
   

   

   Linking a bank account is typically the most cost effective and fastest way to exchange cash into crypto. There are other options (debit cards, wire transfer), but the exchange charges a fee for these.

   
   

3. Follow the flow here to link your bank account using Plaid. Plaid supports 12,000+ financial institutions, so your bank is very likely in the list. If it's not, you might have to use another method (wire transfer, debit card) for funding your account.

4. After you've linked your bank account, you'll now be presented with the option to enter how much money you'd like to deposit. I recommend just depositing $10 for your first buy as that's the smallest amount you can use to buy Bitcoin. One thing to note is that the funds you deposit won't be able to be withdrawn for 7 days. Go ahead and deposit your $10.

   

   There's no need to make some huge investment your first time. Start with $10 (the minimum amount to buy Bitcoin) just so you understand the process.

There might be a small delay between when you deposit the money into your Kraken account and when you can actually buy Bitcoin. Usually this process is instant, especially with small amounts and if you linked your bank account, but sometimes the transaction can take a minute or two to process. Don't sweat! Your funds are safe.

Step 4: Buy Bitcoin

Now it's time to actually buy Bitcoin.

1. Select "Home" from the menu on the left. Then select "Buy" in the middle of the screen.

2. Make sure Bitcoin is selected from the dropdown in the dialog that appears. Enter $10 into the field under Bitcoin. Click "Review".

3. Next review your transaction before you click "Confirm". Notice the $0.10 fee that Kraken charges for the purchase. Notice that you're presented with how much Bitcoin you'll be buying and at what price. When you're satisfied with the details, click "Confirm".

That's it! You've officially bought your first Bitcoin. Now, if you purchased $10 worth of Bitcoin, you might notice that you ended up buying something like ".000115" Bitcoin. Bitcoin is super divisible—you can split one Bitcoin (BTC) into 100 million tiny pieces called satoshis, so 1 BTC = 100,000,000 satoshis, letting you use fractions as small as 0.00000001 BTC. You can think of this in the same way that you think of $100 US dollars being divisible by pennies. $10 is also equal to 1,000 pennies.

Where is my Bitcoin?

So where the heck is your Bitcoin, exactly? You can obviously see how much Bitcoin you own in your portfolio on the Kraken website, but what does that mean? When you make your first purchase, Kraken generates a wallet for you. A crypto wallet's function is exactly the same as a wallet in real life, it's a thing that holds money, in this case crypto. This wallet Kraken generates is a holding wallet in which your crypto is stored. You can add/take from it, but it is not technically yours. Kraken is holding the wallet for you. Effectively, until you actually withdraw that Bitcoin into your own personal wallet, Kraken still controls it.

We'll look into how you can transfer your Bitcoin into your own personal wallet in a future article. Self custody is one of the most important tenants of crypto and lends itself to more useful properties. It's fine to store small amounts of crypto on big centralized exchanges in the short term, but in the long term you want to own it outright.

Things to Consider Over the Long Term

Here are a few more things to consider as you buy more crypto.

Fees: They Add Up

Every move you make comes with a cost:

• Trading Fees: What the exchange charges to buy or sell. Coinbase might hit you with 1% fee. These fees can change every few months, so pay attention when you're reviewing your transaction.

• Payment Fees: Cards cost more—bank transfers are the cheap route.

  
  

Say you buy $100 of Bitcoin with a card on Coinbase—you might pay $3-4 extra. Sell it later, and there’s another fee. You can see how this might cut into what you're investing.

Keep It Safe

You should be obsessed with your crypto security. Creating a strong password for your exchange and enabling 2FA are just the beginning. This is an unforgiving space that takes advantage of the careless and ignorant.

Don’t let your Bitcoin sit on the exchange forever. It’s fine for a bit, but if they get hacked or go belly-up, you’re out of luck. Move it to a wallet:

• Hot Wallet: Online, like an app on your phone. Many reputable companies exist: Guarda, Exodus, Coinbase Wallet, Metamask, etc.

• Hardware Wallet: Offline -- a thumb drive you plug in. The most secure option, but requires some setup and costs a little money. Eventually you'll want your crypto to reside in one of these.

And here’s a big one: never share your private keys or seed phrase for these wallets. That’s the code to your Bitcoin—give it away, and it’s gone for good.

Taxes Can Complicate Things

Taxes can complicate crypto because every time you sell, trade, or even spend Bitcoin, it’s a taxable event in the US. It's treated like selling property, not cash. If you buy Bitcoin at $50,000 and sell at $60,000, you owe capital gains tax on that $10,000 profit, and rates depend on how long you held it (short-term vs. long-term). It gets messier with trades—like swapping Bitcoin for Ethereum—since you’ve got to figure the value in dollars at that exact moment. Plus, if you lose track of your buy and sell prices, you’re stuck digging through records or guessing, which the IRS doesn’t love.

For me, keeping it simple means buying Bitcoin and holding it—no trading or spending—just letting it sit until I’m ready to cash out. That way, I only deal with one taxable event: the sale. I jot down what I paid and when, so I’ve got a clean number to report later. Tools like CoinTracker, Koinly, etc. can help, but honestly, fewer moves equals fewer headaches come tax time.

Extra Options to Buy

Exchanges are the main game, but there are other ways if you’re curious:

• Bitcoin ATMs: Like a cash machine, but for Bitcoin. Stick in money, get BTC. Fees are steep—7-15%—and they’re not everywhere.

• Decentralized Exchanges: Exchanges that use code and the blockchain to trade. This is a MASSIVE topic in crypto and one of the things that makes it so unique.

  
  

Stick with exchanges for awhile—less hassle, less risk of getting burned.

Quick Q&A

1. Does Kraken let me buy Bitcoin anonymously?

Nope, Kraken’s all about KYC—you’ve gotta verify your identity with ID and personal info to trade in the US. If you’re after anonymity, decentralized exchanges might be for you, but that’s a whole different topic.

2. What’s the deal with Kraken’s ‘Pro’ version—should I use it?

Kraken Pro’s the advanced mode—lower fees (like 0.16% vs. 1% on the basic version) and more trading tools, but it’s got a steeper learning curve. Stick with the simple version for now; switch to Pro later when you’re comfy and wanna save on fees.

3. Can I use my PayPal to buy Bitcoin on Kraken?

Not directly—Kraken doesn’t support PayPal deposits yet (as of March 2025). You’re stuck with bank transfers or cards for now, but keep an eye out; they might add it down the road.

4. Why does my bank deposit take so long to show up?

ACH transfers (the free bank option) can take 1-3 days because banks and Kraken need to clear it—think of it like mailing a check vs. handing over cash. Smaller amounts might pop up faster. Kraken does, however, allow you to trade your money for crypto while it's verifying the funds actually got transferred. This means you can deposit and trade instantly.

5. What happens if Kraken shuts down while my Bitcoin’s there?

If Kraken goes belly-up, your Bitcoin could be at risk since they hold it for you—it’s not in your personal wallet. They’ve got a strong reputation and keep most funds in cold storage, but it’s why moving to your own wallet long-term is smart.

6. Can I buy Bitcoin with a credit card instead of a debit card?

Kraken doesn’t let you use credit cards directly for deposits—just debit cards, bank transfers, or wires. It’s a bummer if you’re chasing points, but it keeps things safer from debt traps.

7. How do I know if my Bitcoin purchase actually went through?

Check your Kraken “Portfolio” tab—it’ll show your BTC balance right after the buy. You’ll also get an email confirmation; if it’s not there in a few minutes, ping their support—they’re pretty quick to sort it out.

8. Is there a limit to how much Bitcoin I can buy on Kraken?

Yeah, it depends on your account level—Starter, Intermediate, or Pro (set during KYC). Starter caps you at $5,000 daily, but you can bump it up by verifying more details like proof of address. Check their site for exact limits. Most exchanges impose limits like this.

9. What’s this ‘gas fee’ I keep hearing about—does Kraken charge it?

Gas fees are for blockchain transactions, like withdrawing Bitcoin to your own wallet, not buying on Kraken. Kraken charges a flat withdrawal fee (0.00001 BTC last I checked) instead—way simpler than Ethereum’s wild gas costs.

10. How often does Bitcoin’s price change on Kraken?

Bitcoin’s price updates constantly—Kraken pulls live market data, so it might shift a few dollars (or more) between hitting “Review” and “Confirm.”

Wrapping It Up

That’s how you buy Bitcoin. Pick a reputable exchange, follow the steps above (should be similar if you pick something other than Kraken), and that's it. It's very straightforward once you do it a couple times. If you’ve got questions, or you're uncomfortable with some part of this process, reach out—I’ll happily walk you through it.

Thanks for reading!

Perry