- Venture Capitalist Offers Suggestions on Cash Management Amid Economic Uncertainty
Bitcoin as a Hedge Against Economic Collapse
Billionaire venture capitalist Tim Draper suggests that businesses should maintain “at least two payrolls worth of cash” in Bitcoin (BTC) and other cryptocurrencies. While Draper didn’t specify the allocation between Bitcoin and altcoins, he emphasized BTC’s role as a hedge against deteriorating economic conditions.
The Necessity of Contingency Plans
Draper highlighted recent bank collapses, such as those of Silicon Valley and Silvergate, as evidence of the need for contingency plans to ensure businesses always have accessible cash to sustain themselves and their employees. He criticized governments for over-regulating and micromanaging the banking sector, ultimately harming its long-term health.
Draper argued that businesses must diversify and decentralize to remain sustainable in the current economic climate. He warned that bank collapses could become more frequent if governments continue over-printing money and manipulating interest rates to deal with inflation. According to Draper, Bitcoin offers a potential solution to government insolvency and serves as a hedge against a “domino” run on banks and poor governance.
Cash Management Recommendations
Draper provided several cash management suggestions for businesses in light of the recent U.S. bank collapses. He recommended holding short-term cash in two banks—one local and one global—with enough funds to sustain the business for at least six months. Businesses should also consider yield and capital appreciation in their plans, as high interest rates and inflation make returns on cash holdings critical.
“I think the SVB failure was a wake-up call for the people who have been reluctant to buy Bitcoin,” Draper BeInCrypto.
Draper told BeInCrypto
Additionally, Draper advised businesses to assess the financial health of clients and suppliers and engage in honest discussions with relevant parties. He also stressed the importance of being cautious about hacking and phishing attacks and establishing protocols in case such incidents occur.
Finally, Draper encouraged businesses to embrace decentralization and move away from traditional corporate structures by setting up redundancies for efficient decision-making.
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