Billionaire Tim Draper Asks Companies to Hold Bitcoin in the SVB Aftermath
Billionaire venture capitalist Tim Draper mean businesses should have “at least two payrolls worth of cash” in Bitcoin (BTC) and other cryptocurrencies.
Draper did not specify the percentage allocated to Bitcoin versus altcoins. However, he called BTC a hedge against worsening economic conditions.
Bitcoin is a hedge
Draper said the collapse of banks like Silicon Valley and Silvergate shows the need for contingency plans to ensure a business always has cash on hand to sustain itself and its employees. He added that governments have over-regulated and micro-managed the banking sector, damaging its long-term health.
He said businesses must diversify and decentralize to remain sustainable in the current economic conditions. Such bank collapses will become more likely if governments continue to overprint money and whip up interest rates to meet the resulting inflation.
Draper said government takeovers and lender bailouts leave governments vulnerable to insolvency, and Bitcoin offers a potential solution. He said:
“Bitcoin is a hedge against a ‘domino run’ on the banks and against bad over-controlling governance.”
He added that cryptocurrencies are an excellent option for holding excess cash, as they must be a long-term holding that is easy to sell in times of crisis.
Proposal for cash handling
Keeping excess cash in crypto was one of many suggestions he shared about cash management for businesses struggling with the collapse of several US banks in recent weeks.
Draper advised companies to diversify their risk and keep short-term cash in two banks – one local and one global. He said the amount should be enough to sustain the business for at least six months.
In addition, he advised companies to incorporate returns and capital growth into their plans as interest rates are high now, but so is inflation – so the return on a company’s cash holdings can be “business critical”. He said:
“Normally, a company’s treasury department is mostly meant to look after cash, but these are not normal times.”
He also recommended that businesses ensure that the customers and suppliers they work with are healthy and will not cause unforeseen problems. Draper advised having “sincere and honest” discussions with relevant parties.
Other suggestions included being wary of hacking and phishing and protocol tips on what to do in case it happens.
Draper also recommended companies embrace decentralization and move away from the corporate ladder by setting up redundancies to ensure decisions are made efficiently.
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