Who’s Wrong On Bitcoin – The Simpsons Or Warren Buffett?

Billionaire investor Warren Buffett is bashing Bitcoin again. But this time he has a formidable foe battling to popularize cryptocurrencies – The Simpsons.

“Cryptocurrencies basically have no value,” chairman and CEO of Berkshire Hathaway told CNBC in an interview this week. “I don’t own any cryptocurrency. I never will.”

But Buffett knows he is at odds with the market. Bitcoin, which is issued on a blockchain ledger with no banking intermediaries, burst through the key price ceiling of $10,000 this month. True to form, whenever the digital currency hits a milestone in the market, suddenly mainstream shows interest. In fact, Google searches for Bitcoin rose by a third in the first week of February as the price started to rise.

It was no surprise to find CNBC asking the Oracle of Omaha if he had changed his mind on cryptocurrencies. He hadn’t. Reprising his long-held criticism, Buffett suggested that Bitcoin's only impact on the world has been to reduce the number of suitcases ferrying ill-gotten cash. “Bitcoin has been used to move around a fair amount of money illegally,” he said.

Not all the attention was negative.

An episode of "The Simpsons" out this week explained the benefits of cryptocurrencies in a way anybody can understand. Listed on Fox with the title “Frinkoin”, season 31, episode 13 on one of the longest-running TV shows tracked the sudden rise of a local professor to become the town’s richest man via cryptocurrency. "The Big Bang Theory" star Jim Parsons was a guest voice and educated viewers about the “cool subject” of cryptocurrency tokens.

These polarizing narratives – money-laundering or spectacular investment opportunity – unfortunately are typical of much of the ill-informed debate around cryptocurrencies. Traditional investors have often been wary of the emerging asset class, questioning what underpins its value, while many millennials have rushed to add riskier cryptocurrencies to their younger portfolios. The fact is, there does not need to be such a dichotomy. When it comes to answering who is wrong on crypto – Buffett or Bart – the best answer may well be: “Both.”

Best of both worlds

It is possible to bridge the divide and marry the benefits of both traditional investments and digital currencies – through asset-backed tokens. Traditional markets are far less volatile than cryptocurrency and offer much deeper liquidity. Cryptocurrencies – with all transactions recorded on an immutable, public ledger – offer better transparency and extra efficiency by cutting out the need for middlemen.

Nowadays, savvy investors have found opportunities that combine the best of both – tangible assets, such as gold, providing the backing for tokens issued on a blockchain. These tokens can be freely traded or redeemed for the yellow metal. It is no wonder Bitcoin is often described as “digital gold”. Little wonder, too, that the price of gold and the price of Bitcoin often rise together as they can both be viewed as safe-haven assets in times of geopolitical crisis, such as during this year’s US-Iran saber-rattling.

Many in the traditional financial world, like Buffet, aim to dismiss cryptocurrencies as nothing better than a money-laundering device. On the other hand, The Simpsons is hardly alone in helping to create the image that cryptocurrency can catapult new investors to prodigious profits.

But let’s avoid the Buffett-Simpsons schism. Traditional investors have taught the world much about careful decisions and long-term gains. The innovations of cryptocurrencies have also opened pathways to new opportunities. So, for those investors who can avoid the hyperbole on each side, there is an appealing middle ground. It is a place where digital tokens are backed up by hard assets, such as gold, able to provide stability, liquidity, efficiency and transparency.

How can Mr. Buffett argue with that? With the 89-year-old legendary investor set in his ways, we should not expect to see him in an animated TV series any time soon. Still, if the script-writers do a little more homework, perhaps we can look forward to a new storyline -- an episode on the “cool subject” of gold-backed tokens.

(Brian Hankey is a co-founder of CACHE, a Singapore-based provider of transparent, redeemable tokens that are backed by gold in vaults around the world.)