Venture capitalist and Bitcoin billionaire Tim Draper includes Bitcoin as part of a series of money management recommendations he offers startup founders. Draper recommended having at least the equivalent of two salaries in cash in bitcoin or other cryptocurrencies to avoid being affected by a bank failure such as the collapse of Silicon Valley Bank (SVB).
Tim Draper touts bitcoin as a hedge against bank failures
Tim Draper, a well-known venture capitalist and crypto enthusiast, recommends bitcoin as part of his cash diversification advice to founders; he won an auction for 30,000 bitcoins from the U.S. Marshals in 2014and is known for his predictions of bitcoin prices Draper, known for his predictions of the Bitcoin price, posted a document on Twitter commenting on several considerations companies should make in the face of a bank failure.
22} document. provides seven different ways to avoid cash-flow problems:
boards of directors and management are responsible for paying salaries even in times of crisis, which could increasingly happen if the government continues to print money and fluctuate interest rates to counter inflation caused by over-printing money, and the bank’s It is important to build contingency plans against bank failures, which are increasingly likely if the government continues to print money and fluctuate interest rates to counter inflation from over-printing money.
By various reports, many high-tech startups that relied on Silicon Valley Bank faced a period of uncertainty when the bank failed because they did not have the liquidity needed to complete theirsalarypayments. However, the Federal Deposit Insurance Corporation (FDIC) averted the situation and repaid customer deposits in full under a systemic risk exception approved by the Federal Reserve.
Recommendations for Bank Diversification
One of the key points of Draper’s cash management plan, devised with the help of a Wharton School graduate, is to diversify bank risk; Draper states that firms can no longer rely on only one institution to manage their money, and that at least six months’ worth of short-term funds should be kept in two banks ( local and global banks), he advises.
Draper also recommends keeping at least two salaries’ worth of cash in bitcoin or other cryptocurrencies and keeping any excess money in assets that can be sold in an emergency. He supports taking these measures, stating that:
For the first time in a long time, a government is taking over a bank and the government itself is at risk of becoming insolvent. Bitcoin is a hedge against a “domino” run on banks and poor over-controlling governance.
What do you think of Tim Draper’s advice to hold bitcoin as a hedge against bank runs? Let us know in the comments section below.
Image credit: Shutterstock, Pixabay, Wiki Commons
