Czech Central Bank Governor Alex Michl noted that incorporating bitcoin into the bank's reserves could enhance performance due to its low correlation with traditional assets, allowing for potential higher returns without significantly increasing risk. However, Michl emphasized the asset's high volatility, stating, 'Its volatility is much higher than other assets.
One day its price may be much higher or it could go to zero.' He highlighted that all assets carry the risk of losing value, which is why diversification is key. Michl shared a personal anecdote about his first bitcoin transaction, buying a coffee that would now be worth around $350, underscoring the asset's unpredictable nature.
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 experience with blockchain-based assets.
A study by the CNB found that bitcoin's low long-term correlation with traditional assets could make it a valuable addition to a portfolio, potentially increasing returns without elevating risk. Despite this, the bank's Board decided against investing its foreign exchange reserves in bitcoin due to its volatility.