According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the bank's reserves could potentially enhance performance due to its low correlation with traditional assets. However, Michl emphasized that the cryptocurrency's volatility is substantially higher than other assets, which could lead to significant losses.
In a speech, Michl noted that bitcoin's price could either surge or plummet to zero, underscoring the risks associated with investing in the asset. The central bank's study revealed that bitcoin's returns are not closely tied to those of other assets, making it a potentially valuable addition to a portfolio. Nevertheless, the bank's board ultimately decided against investing its foreign exchange reserves in bitcoin due to the associated risks.
The Czech National Bank had previously purchased $1 million in bitcoin as part of a test portfolio to gain hands-on experience with blockchain-based assets and explore their potential to reshape the country's payment and financial systems.