Nomad Capitalist Chapter 12: Cryptocurrency - The Most Profitable Investment of the Decade

Henderson opens this chapter with an interview. Not just any interview. He is sitting in his home in Bogota, Colombia, talking to Michael Saylor. Yes, that Michael Saylor. The MicroStrategy guy who bought over $2 billion in Bitcoin by early 2021.

Saylor tells Henderson that Bitcoin is bigger than Google, Facebook, Apple, Amazon, and Microsoft combined. Bigger than the internet itself. Only 1% of people understand it. Nobody can stop it.

Bold words. But coming from a guy who made billions, they carry weight.

Here is where Henderson surprised me. He does not jump on the Bitcoin hype train. He says straight away that he is not a Bitcoin maximalist. He is not even a crypto maximalist. He likes diversification. He dabbles in crypto, sure. But he is not putting every dollar into it.

That is a refreshing take. Most crypto chapters in books like this go one of two ways. Either the author is all in and tells you crypto will replace everything. Or the author dismisses it as speculation and moves on. Henderson does neither. He sits in the middle. Crypto is a tool. A useful one. But not the only one.

What Is Cryptocurrency Anyway

Henderson gives a quick explanation for people who have never bought a single coin. Cryptocurrency is digital. It is not printed by governments. It lives on something called a blockchain, which is basically a giant shared ledger that nobody controls.

There are two ways to create new coins. Proof of Work, where computers solve hard math problems. And Proof of Stake, where you can only validate transactions based on how many coins you already hold. Both systems keep things decentralized.

The key point Henderson makes is simple. Bitcoin was born in 2008 during the financial crisis. People were angry at banks. Crypto was the answer to that anger. No middlemen. No hidden fees. No government printing money whenever it felt like it.

And here is the number that matters. Bitcoin has a hard limit of 21 million coins. Once they are all mined, that is it. No more. Compare that to the US dollar, where the Federal Reserve can print as much as they want. Crypto is deflationary by design.

I remember the early days of Bitcoin. People at work talked about it like it was a joke. A colleague bought some in 2013 for fun. I did not. We all know how that story ended.

The Most Profitable Investment Ever

Henderson throws out a number that is hard to believe. If you invested in Bitcoin on the first available exchange in March 2010, you would have paid $0.003 per coin. The return by the time he wrote this? Over 1.3 billion percent. One trillion percent increase.

For comparison, the S&P 500 has averaged 9.8% annually over 90 years. Gold returned about 18% in the same comparison period. Crypto is not in the same league. It is not even playing the same sport.

But Henderson is honest about the downsides too. More than half of all existing Bitcoins have not been used in a single transaction in recent years. People are holding, not spending. He brings up Gresham’s Law here. Bad money drives out good money. If you have regular dollars and Bitcoin, you spend the dollars first. You keep the Bitcoin because you expect it to be worth more tomorrow.

This means Bitcoin is more like digital gold than digital cash. People store value in it. They do not buy coffee with it.

Henderson mentions Roger Ver, who spoke at his Nomad Capitalist Live event and preferred to give everyone Bitcoin Cash instead of taking speaker fees. Bitcoin Cash was designed to actually work as currency, not just a store of value.

I think Henderson gets this exactly right. Crypto is powerful. But until people actually use it to buy things every day, it stays speculative. It stays volatile. It stays a bet, not a currency.

The Tax Problem Nobody Wants to Talk About

This is where the chapter gets real. Henderson tells the story of a young client named Matthew who made $800,000 during the pandemic with a side hustle. Incredible. But then the tax bill came. $375,000. Almost half.

Henderson does something cruel but effective. He asks Matthew what he would have done with that money. Matthew says he would have invested it in crypto. They run the numbers together. That $375,000 invested in crypto would have become $784,000.

The cost of staying in a high-tax country is not just the tax bill. It is the opportunity cost of what that money could have earned.

Then Henderson goes further. US citizens face extra problems. FATCA regulations scare away foreign institutions. Many ICOs block Americans entirely. You cannot even participate in some of the best crypto deals because of your passport.

And the IRS is getting smarter. Since 2020, your tax form straight up asks if you dealt with virtual currency. Companies must report crypto holdings too. Henderson warns against the people who think they can just hide their crypto and not report it. That 1980s thinking about anonymous offshore accounts does not work anymore.

Here is his warning. The IRS can see more than you think. If you have a low-paying job but suddenly buy a Ferrari, they will notice. If you do not report your crypto, they can freeze your passport. They can put you on trial. Even trusts in exotic jurisdictions do not always protect you if the underlying asset is on US soil.

Henderson is clear. He does not encourage tax dodging. He calls himself the goody-two-shoes of the offshore industry. And honestly, that makes his advice more trustworthy. He is not selling you illegal schemes. He is showing you legal ones.

Offshore Solutions for Crypto People

Here is where the chapter becomes truly useful. Henderson lays out a framework for crypto investors who want to legally reduce their tax burden. Four pieces of the puzzle.

Crypto-Friendly Banking

Not all banks like crypto. Henderson says even UAE and Singapore banks are not very crypto-friendly. The better options are Liechtenstein, Bermuda, British Virgin Islands, Hong Kong, and Switzerland.

Switzerland is the standout. The canton of Zug is called “Crypto Valley.” Hundreds of blockchain startups. Pro-crypto legislation from the government. Banks that actually understand digital currencies. The whole country wants to be “Crypto Nation.”

Bermuda is another good one. Since 2018 they have a separate class of banking licenses for FinTech. They passed laws allowing quick approval of ICOs. The government openly wants to be a crypto incubator.

Henderson also talks about using crypto to fund offshore accounts. You can use platforms to convert Bitcoin to local currency. You can use multi-currency cards like Revolut. Some clients buy gold with Bitcoin first, then liquidate the gold to fund a bank account. Creative, legal, and effective.

Offshore Companies for Crypto

Setting up a crypto company offshore is easy, Henderson says. Malta, Hong Kong, Cayman Islands, British Virgin Islands, Estonia, Bulgaria. Malta even created a regulatory body specifically for crypto startups. Their prime minister called crypto “the inevitable future of money.” Malta is known as “Blockchain Island.”

But here is the trap. An offshore company alone does not save you on taxes. If you are still living in a high-tax country, you still owe taxes. The Controlled Foreign Corporation rules in the US mean a foreign company owned by an American must pay US corporate taxes.

You need to address the personal side too. Move yourself, not just your company. Otherwise you are just adding paperwork.

Get a Second Passport

Henderson circles back to his favorite topic. Crypto investors need a second passport more than most people. Why? Because crypto values change fast. Regulations change fast. You need an exit plan ready before things go wrong.

Vanuatu was the first country to accept Bitcoin for citizenship by investment. Antigua and Barbuda accepts it too. Roger Ver got citizenship in Antigua before renouncing his US citizenship and now lives there partly because the country actually accepts Bitcoin Cash for everyday purchases. Gas, taxis, restaurants, villas.

Henderson’s advice is urgent. Do not wait for crypto prices to drop before getting a second passport. You cannot buy insurance after your house burns down. If your government passes a new tax law, it can happen in a month. You will not have time to even start the paperwork. But if you already have a second passport, you can leave within weeks.

For Americans specifically, he mentions Puerto Rico. Move there to lock in 0% capital gains. You only need to spend five months a year there. Figure out the rest of your plan while paying zero on capital gains. Then renounce when you are ready.

Diversify Out of Crypto

Henderson closes with diversification. Do not put everything in crypto. Why? Because crypto could theoretically become worthless. If quantum computing cracks the cryptographic foundations, the whole thing collapses. That is the risk of betting everything on technology.

And practically, banks and embassies want to see normal bank accounts. If you need a visa or a second passport, you need regular cash flow, regular bank statements, regular fiat money. Crypto alone will not get you through an embassy interview.

Henderson calls himself a pragmatist. He wants to use crypto for its benefits. Keeping money outside the banking system. Store of value. Hedge against inflation. But he also wants other options. At the end of the day, diversification is the game.

Key Takeaway

Henderson’s best advice in this chapter is to treat crypto as a financial decision, not a philosophical one. Too many crypto people are in it because they hate governments or believe in a financial revolution. That is fine as motivation. But it should not drive your investment strategy.

Have an early adopter mindset. Do not get attached to a movement. See crypto for what it is: a tool. A very profitable tool if used right. But still just a tool.

If you are in a high-tax country and you have significant crypto holdings, the time to plan is now. Not when prices peak. Not when the tax bill arrives. Now. Get the second passport. Set up the offshore banking. Create the exit plan. Because by the time everyone else is doing it, it will be too late.

From my perspective, Henderson is one of the few voices in this space who talks about crypto without going to extremes. He is not a cheerleader. He is not a skeptic. He is a guy who helps millionaire crypto investors protect their money legally. That practical experience shows in every page of this chapter.

Book: Nomad Capitalist by Andrew Henderson | ISBN: 9798461831486

Previous: Chapter 11 - Investing Overseas Next: Chapter 13 - Frontier Markets

Part of the Nomad Capitalist series