According to Alex Michl, Governor of the Czech Republic's central bank, incorporating bitcoin into the institution's reserves could enhance performance due to its low correlation with traditional assets. However, Michl emphasized the asset's high volatility, citing the potential for its value to fluctuate significantly or even drop to zero.
He noted that all assets carry the risk of total value loss, which is why diversified portfolios are essential. Michl shared his personal experience with bitcoin, recounting how a coffee purchase made with the cryptocurrency would now be worth approximately $350, making it the most expensive coffee he has ever bought. Despite acknowledging bitcoin's high returns over time, Michl expressed concerns about its risk profile, stating that it appears 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 and their potential impact on the country's future payment and financial systems.
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 while maintaining similar risk levels. Nevertheless, the Bank Board decided against investing the nation's FX reserves in bitcoin due to its high volatility.