If you’re a crypto investor, or a stock investor looking to get into crypto, understanding your tax obligations early on is critical to your ongoing success. And if you’re in a Western country, especially the US, it doesn’t take long to realize you badly you’re being screwed.
But by going offshore and employing legal tax reduction strategies, you’ll not only can not only maximise your profits and save big on taxes, you’ll also be able to safeguard your wealth long-term.
If you’re not doing that already, you’re missing out. And it’s only going to get worse from here on.
Here’s Why Diamond Hands Investors Are Getting Screwed
If the past few years have taught us anything, it’s to expect the unexpected.
Governments have shown their true face to those who ever doubted that their primary objective is, was and always will be control – over people, over the economy. Sooner or later, they’re coming for your crypto.
They’re actively seeking ways to tax you on crypto in the USA. (And even without this unrecognized gains tax, they’ll still find ways to tax you.)
If you’re a seasoned crypto investor you know this already, if you’re still relatively new to crypto, this shouldn’t surprise you either.
So the sooner you get out and implement an offshore plan, the better. This is particularly important for diamond hands investors who want to hold their assets longer.
Depending on when you bought and how long you’ve been hodling you could have serious tax consequences.
Think about it:
- If you buy low and sell high you’re screwing yourself.
- If you buy low and then decide to go offshore when it’s higher, you’re still screwing yourself.
This doesn’t just apply to crypto traders. If you invest in stock, the principal is technically the same.
Investing for the long haul means taking a position that it will increase in value in the future – but that point is moot if the profits are siphoned off by the government.
Better to start of your diamond hands adventure with a clean slate by moving offshore to a more tax-friendly jurisdiction which isn’t so down on crypto.
What Does Diamond Hands Mean?
As an investor, you’ve probably come across the term diamond hands before.
But just for those who might think it’s the name of the latet Bond villain, the term diamond hands relates to investors who doggedly hold onto their investments even during some particularly hairy market fluctuations.
In other words, their high-risk tolerance means they’re as tough as diamonds, and their hands can take the heat – hence diamond hands.
At Nomad Capitalist we believe that the best way to protect and grow your wealth is through a diversified portfolio, this includes real estate holdings and perennial safe-havens like gold, balanced against riskier (but potentially more rewarding) investments like cryptocurrencies.
But the only way to truly achieve that financial freedom is to go offshore to ensure you’re not punished for your success by the taxman.
Evolution Of The Term Diamond Hands
“Our favourite holding period is forever” – Warren Buffet. 💎
The original OG diamond hands investor is Warren Buffet, and the above quote to his shareholders in the 80s was in relation to companies.
So rather than diamonds, companies are forever, but the thing to bear in mind about Buffet is that we disagree with him on one core issue.
We have huge respect for him as an investor, but also the man who said, that the wealthy “should be paying a lot more in taxes.”
So do you necessarily want to listen to his advice regarding crypto? Probably not.
In crypto, diamond hands takes on an extra dimension since, unlike gold or even stocks which tend to be stable over time, crypto is more prone to fluctuation.
A lot of people lost big on crypto (which is why always say to diversify) but it’s also possible you could buy in when bitcoin’s at $10k, later it goes up to $100k but you end up with a massive bill. And that’s no good either.
At some point you’re going to want to cash out those gains, or at least some of those gains, and that’s when they hit you. Actually, with all this talk of unrealised capital gains taxes, they may even decide to hit you before you cash out. Which defeats the whole purpose of being a diamond hands investor in the first place.
Diamond Hands Tax Considerations
Now let’s take another example. You bought in at $25k, it initially took off then the value dropped, bringing you right back down to $25k.
Most people in the crypto investment community would see that as a bad outcome but, in a way it’s good. Because it means you can go offshore without paying an exit tax.
And when the value rallies, they’re not going to come after you because now you’ve moved to a more tax-friendly offshore jurisdiction.
By that we don’t really mean countries like Monaco or Vanuatu, UAE perhaps, but also territorial tax countries, or countries with non-dom taxation systems. Hell, you could even live in London in certain cases, it all depends on how you structure it.
And that’s where we come in. See it’s not enough just to know about crypto-friendly countries and ones with low taxes, it’s knowing how to tie it all together in a way that’s fully legal and yet ensures your assets are completely shielded from the IRS and the government. And this something we have extensive experience doing.
When bitcoin, and the crypto market overall, was at its peak we were flooded with applicants all saying pretty much the same thing, “quick! I need help. I’m making a ton of money on crypto but I’m going to loose a ton of it to taxes! I need to get away from them and I need to do it yesterday.”
It’s a bitter sweet feeling, making an investment, watching the value rise but then watching your tax burden rise with it. But as a Nomad Capitalist client we’ll make that pain go away.
The Diamond Hands Offshore Solution
The first step to being a true diamond hands investor is to determine exactly where you want to find a best tax-free country that best suits your unique needs. The issue for Americans is the added need to renounce and gain a second citizenship.
If this is something you want to do, then now is the time to get in touch to discuss options (otherwise, you risk even more taxes once the market rallies.)
By moving offshore you can finally follow the diamond hands strategy properly.
A further price dip means you can pick up more crypto at a good price. You have the chance to sell it at a profit later, of course, that’s investment 101, but instead you choose to hodl.
The market goes through another cycle, you buy more when it’s low and once again prices rise. This time maybe you decide to sell a little, spread things out a little, maybe put some money into stocks.
It doesn’t matter, you don’t need to worry about capital gains, or anything of the sort, you’ve got diamond hands and zero taxes.
Stop Holding High Taxes
This applies not only to crypto investors, but to investors of all stripes.
From newly minted millionaires to seasoned stock market veterans, the story is the same.
Likewise, if you’re a long-term investor keen to expand your portfolio and looking to play the long game on crypto assets, you need to make sure that the risk is worth it.
Having diamond hands doesn’t mean you’ve got rocks in your head. Only a madman or a masochist would enjoy investing lots of money and taking on tons of risk with zero reward.
Where’s the fun in riding the rollercoaster knowing that, no matter what happens, you lose out because whatever profit you make, you’ll need to hand over a huge chunk of it to the taxman.
Investing in crypto can bring you huge rewards, but you need to factor in the additional risk of your windfalls being severely taxed. So before you begin your diamond hands journey talk to us about creating your own special Action Plan to legally reduce taxes.
Diamond Hands & Crypto FAQ
Diamond hands is a slang term for investors who hold on to their investments long-term even when the going gets tough.
They’re the opposite of so-called “paper hands” investors, who panic sell at the first sign of trouble.
Cryptocurrency traders have to be made of stronger stuff since the value of crypto is far more volatile and is considered more of a high-risk investment compared to other investment like stocks and bonds.
In the often-macho world of crypto, paper hands investors are mocked for their lack of conviction. But by selling every time the market has a wobble, they allow long-haul investors to snap up more crypto for a lower price.
Younger investors love the crypto thrill-ride because it gives them the chance to make quick gains, more than they would in the stock market or with any other type of asset.
But if you want to be a true diamond hands investor, you need to ensure you’re not just taking all the risk and giving the taxman all the rewards.
Talk to us today to lean how to legally reduce your taxes to zero, so you can safeguard your wealth now and well into the future.