- The banking crisis of early 2023 has been the biggest since the financial collapse of 2008.
- Tim Draper recommended using Bitcoin as a hedge against the current banking system and bad governments with too many regulations.
- The current banking crisis seems to have faded away, however, if regulators do not include cryptocurrencies, more turmoil will follow.
The recent banking crisis has caused a growing distrust of banks. The acquisition of Credit Suisse by UBS has added to this uncertainty in the banking system. Deutsche Bank has been under investigation and there have been significant withdrawals from Silicon Valley Bank and First Republic Bank.
Tim Draper, a well-known venture capitalist and entrepreneur, and one of Wall Street’s biggest personalities opined that there is an easy way to protect yourself against danger.
“I have recommended to all CFOs that, as a hedge against bank or government failures, they have at least two Bitcoin payrolls to avoid catastrophic failure. I continue to advocate for Bitcoin as a hedge against the current antiquated and over-regulated banking system and as a hedge against over-regulated bad governments.”
Seeking safety, investors have moved their assets to “too big to fail” banks. Unlike traditional banks, which rely on intermediaries, DeFi can provide financial services to anyone with an internet connection, with transactions recorded on a public ledger. This will only accelerate the adoption of cryptocurrencies as an alternative to the traditional banking system.
“I think the failure of SVB was a wake-up call for people who have been reluctant to buy Bitcoin. Now, it’s mission critical to stay on that path.”
Cryptocurrency adoption rates vary greatly between developed and underdeveloped countries and between those with stable and unstable currencies. According to a United Nations report, Venezuela ranks third among the countries with the highest cryptocurrency adoption, with Russia and Ukraine leading it in the ranking.
“Bitcoin is loved by people in countries with weak currencies, it offers people the opportunity to create and store value without the risk of the government overprinting and devaluing their labor. The United States seems to be heading down that path of inflation and high interest rates, and I think now more and more people will use Bitcoin to store value.”
“Banking crises can only be avoided by allowing banks to accept and operate in Bitcoin. Otherwise, banks will operate with a shrinking market as people move to better technology . “
Cryptocurrencies have come under fire for their use to circumvent sanctions. But Draper believes that the effort to stop them is futile.
“We are experiencing an anthropological leap with Bitcoin. The landscape is changing. During landscape changes, great leaders flow with the change. Weak leaders try to ride the wave.”
The current banking crisis seems to have faded, for now. However, Draper is convinced that if regulators don’t include cryptocurrencies, more turmoil will follow.
“If regulators persist in keeping banks out of the lucrative cryptocurrency market, more banks will fail as the economy turns crypto. By embracing the change, banks will be able to adapt and thrive in the new Bitcoin economy.”
Draper’s enthusiasm for the cryptocurrency market will be a welcome tonic for some investors. 2022 was a volatile year for cryptocurrencies, with assets falling more than 60%. Only 1 in 3 homeowners made a profit that year.
“The market will ultimately judge the best result, FTX was a clear sign that the centralized authority of any money supply is not as good as a decentralized system like the Bitcoin blockchain.”
