American venture capitalist and entrepreneur Tim Draper has advised business founders to keep at least two payrolls’ worth of cash in Bitcoin or alternative cryptocurrencies, in response to the uncertainty created by the collapse of Silicon Valley Bank (SVB). Draper believes Bitcoin is a hedge against a “domino run” on the banks and overbearing government intervention.
He suggests that businesses keep at least “6 months of short-term cash” in two separate bank accounts, one local and another international, and hold two payrolls’ worth of cash in Bitcoin and other cryptocurrencies. Draper further emphasized the importance of contingency plans, given that many startups sought emergency relief from him after SVB and other banks shut down.
Also Read: Jim Cramer: Avoid Crypto, Stick With Gold for a “Real Hedge” Against Inflation
The Need for a Backup Plan
Draper’s recommendation is based on his view that for the “first time in many years,” governments are seizing control of banks, and governments themselves are “at risk of becoming insolvent.” Thus, he suggests diversification in multiple bank accounts and cryptocurrencies, as businesses “can no longer rely” on a single bank or governing body to manage their cash.
Draper also highlighted the importance of contingency plans to mitigate bank failures that may happen more frequently if the government continues to print money and manipulate interest rates to counteract inflation caused by over-printing money.
Preventing Fraud
Draper reminds business founders to be vigilant against the risk of fraud, noting that fraudsters are skilled at identifying weaknesses in a system and exploiting them. He advises founders to verify with all parties involved whenever there is a change in wire instructions or a new approval system to prevent phishing theft.
Draper recently performed a self-composed Bitcoin song after his keynote speech at Paris Blockchain Week 2023 on March 22. He said the song was dedicated to SVB and “all the banks that have failed and will fail.” The song received a round of applause from the audience, with Draper concluding his time on stage by saying blockchain, Bitcoin, and smart contracts make up one of the “greatest transitions in the history of the world.”
