Draper’s Diversification Advice: Bitcoin and Cryptocurrency as A Solution to Bank Failures

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American venture capital investor and Bitcoin entrepreneur Tim Draper, recently issued a warning to business founders. He believes that if the government continues to “print money and whipsaw interest rates,” we could see “more and more” bank failures. 

As a result, Draper is urging entrepreneurs to take action to protect their businesses, including diversifying their cash holdings by investing in Bitcoin and other cryptocurrencies.

In a report directed at business founders, Draper highlights the need to be prepared for the potential collapse of traditional banking institutions. He suggests that businesses should no longer rely on a single bank or governing body to manage their cash. 

Instead, he advises keeping at least “6 months of short-term cash” in two separate bank accounts, one local and one international. He also recommends keeping at least two payrolls worth of cash in Bitcoin and other cryptocurrencies.

Draper believes Bitcoin is a hedge against a “domino run” on the banks and overbearing government intervention. In his opinion, this is because for the “first time in many years,” governments are seizing control of banks, and governments themselves are “at risk of becoming insolvent.”

These preventative measures are necessary because of the collapse of Silicon Valley Bank (SVB) and other banks. Those incidents have left many startups seeking emergency relief. 

Draper emphasizes the importance of contingency plans for bank failures that could happen more and more often if the government continues to print money. There’s also the threat of whip-sawing interest rates to counteract inflation caused by the over-printing of money.

In addition to diversifying cash holdings, Draper advises founders to be vigilant against the risk of fraud. Fraudsters are skilled at identifying weaknesses in a system and exploiting them. 

To prevent phishing theft, he advises verifying with all parties involved whenever there is a change in wire instructions or a new approval system.

By diversifying their cash holdings with Bitcoin and other cryptocurrencies and following Draper’s advice on contingency plans and fraud prevention, businesses can protect themselves against potential disasters. 

As the saying goes, “An ounce of prevention is worth a pound of cure.”

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