The governor of the Czech Republic's central bank, Alex Michl, has expressed that incorporating bitcoin into the bank's reserves could enhance performance due to its low correlation with traditional assets, but its volatility poses a significant risk. In a speech, Michl noted that bitcoin's price fluctuations are much higher than other assets, making it a risky investment.
He emphasized that all assets carry the risk of losing value, which is why diversification is key. Michl shared his personal experience with bitcoin, recalling that his first purchase was a coffee that would now be worth around $350, highlighting the cryptocurrency'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 created to gain 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, the bank's Board decided not to invest its foreign exchange reserves in bitcoin due to its volatility.