Cryptocurrencies got a bit of a tongue-lashing this week, as Charlie Munger, Warren Buffett’s right hand man at Berkshire Hathaway, unloaded a stream of vitriol on Bitcoin, calling it “worthless” and an “artificial gold” (to pick some of the more printable quotes from the venerable investor).

Even the Wizard of Omaha himself wasn’t exactly sparing in his comments, condemning Bitcoin (and, by extension, other cryptocurrencies) as “non-productive assets”, saying that the only reason why Bitcoin would ever grow in value is because the market is selling false hype about a product rather than any tangible increases in underlying value.

While it is entirely correct that the meteoric rise in Bitcoin value has some basis in overly ebullient market sentiment, is it fair to call all cryptocurrencies “non-productive assets”? After all, the US Greenback itself is officially backed by nothing less than “full faith and credit of the United States government”.

And while the United States of America produces goods and services, the US Government does not. “Full faith and credit” of US government is based on its coercive powers (laws, regulations) as well as its massive fiscal powers through the ability to levy taxes. Hypothetically, if these powers become truncated because of a prolonged economic depression, will the US Dollar become less of a currency because “faith” in US government has been diminished. USD would certainly become more volatile, risky investment, less of an safe haven (along with all other US-based securities), but what of its underlying nature as a “currency”?

Some would say that traditional currencies are directly tied to physical liquid assets (federal budget), while cryptocurrencies are based on calculations of a complex equation (called a hash). But the United States abandoned the gold standard in favour of fiat currency in 1971 for a good reason. Cryptocurrencies are merely a decentralised extension of the fiat currency idea.

And if physical assets are what you desire, there are existing cryptocurrency projects that are tied to the value of a physical asset (e.g. gold, oil, even diamonds), although in this humble trader’s opinion, that is a step backwards to appease the traditionalist crowd. Cryptocurrencies need to embrace their modern stateless roots, celebrate their reliance on the ingenuity of the community of investors and engineers who are not subject to the government diktat.

Cryptocurrencies are a volatile and risky investment right now, there is no doubt about that. But volatility can be overcome through wider acceptance of cryptos as a means of legal tender. If more people buy and sell using cryptos, if coins become more liquid and widely accepted means of exchange, Bitcoin and its brethren can gain the same type of “full faith and credit” as the US Dollar currently enjoys.

Faith is, after all, not an asset, but it can certainly “perform” when the surrounding economic environment is healthy and self-sustaining.

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Mark Crouch, Trader at Accendo Markets