According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the bank's reserves could enhance performance due to its low correlation with traditional assets, but its high volatility is a major concern. Michl noted that bitcoin's price fluctuations are significantly higher than other assets, which could result in substantial losses.
He emphasized the importance of diversification, stating that all assets carry the risk of losing value, which is why banks maintain diverse portfolios. Although bitcoin has shown high returns over time, Michl believes it is too risky for investment. The Czech National Bank's $1 million test portfolio, which includes bitcoin, a USD stablecoin, and a tokenized deposit, was established to gain hands-on experience with blockchain-based assets. A study by the bank found that bitcoin's low long-term correlation with traditional assets could make it a valuable addition to a portfolio, potentially increasing returns without significantly increasing risk.
However, due to its volatility, the bank's Board decided not to invest its foreign exchange reserves in bitcoin at this time.