According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the bank's reserves could potentially enhance performance. However, he cautioned that its volatility far exceeds that of other assets, posing a significant risk. Michl noted that while all assets carry the risk of losing their value, diversification is key to mitigating this risk.
In his experience with bitcoin, he observed that it can yield high returns over time but appears too risky for investment. The Czech National Bank created a $1 million test portfolio in November, which includes bitcoin, a USD stablecoin, and a tokenized deposit, to gain hands-on experience with blockchain-based assets. A study by the CNB found that bitcoin's low correlation with traditional assets makes it a potentially valuable addition to a portfolio, as it can increase returns without significantly raising risk. Nonetheless, the bank's Board decided against investing its foreign exchange reserves in bitcoin due to its volatility.