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 the significant risk associated with bitcoin's high volatility, stating that its value could fluctuate drastically or even drop to zero. Michl noted that while all assets carry the risk of losing value, the unpredictability of bitcoin makes it unwise to rely solely on it.
The Czech National Bank's $1 million test portfolio, which includes bitcoin, a USD stablecoin, and a tokenized deposit, was established to gain practical 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 significantly raising risk.
Nevertheless, the bank's board decided against investing its foreign exchange reserves in bitcoin due to its excessive risk, despite its potential for high returns.