According to Alex Michl, Governor of the Czech Republic's central bank, incorporating bitcoin into the bank's reserves could potentially enhance performance due to its low correlation with traditional assets. However, he cautioned that the cryptocurrency's volatility far exceeds that of other assets, posing a significant risk.
Michl noted that all assets carry the risk of losing value, emphasizing the importance of diversified portfolios. The central bank's $1 million test portfolio, established in November, includes bitcoin, a USD stablecoin, and a tokenized deposit, aiming to gain practical experience with blockchain-based assets.
A study by the CNB found that bitcoin's long-term returns are not closely tied to those of other assets, making it a potentially valuable addition to a portfolio. Nonetheless, the bank's Board decided against investing its foreign exchange reserves in bitcoin due to its high risk profile, despite the potential for higher returns with smaller allocations.