According to the governor of the Czech Republic's central bank, Alex Michl, incorporating bitcoin into the institution's reserves could potentially enhance performance due to its low correlation with traditional assets. However, Michl emphasized the significant volatility of bitcoin, stating that its value could fluctuate wildly or even drop to zero. He noted that all assets carry the risk of losing value, which is why diversification is crucial. Despite acknowledging bitcoin's potential for high returns, Michl expressed caution, citing the asset's unpredictability.
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 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 raising risk.
Nonetheless, the bank's Board decided against investing its foreign exchange reserves in bitcoin due to its high risk profile.