According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the bank's reserves could enhance performance due to its low correlation with traditional assets. However, Michl emphasized the significant volatility of bitcoin, stating that its value could potentially drop to zero. He noted that while all assets carry the risk of losing value, diversification is key to mitigating this risk. The Czech National Bank had purchased $1 million in bitcoin as part of a test portfolio, which also included a USD stablecoin and a tokenized deposit, to gain hands-on 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. Despite this, the bank's Board decided not to invest its foreign exchange reserves in bitcoin due to its high risk profile.