According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the institution's reserves could enhance performance due to its low correlation with traditional assets, but its high volatility is a major concern. Michl noted that all assets carry the risk of losing value, emphasizing the importance of diversified portfolios. The central bank's study found that bitcoin can provide high returns with minimal correlation to other assets, similar to venture capital but more liquid. However, the bank ultimately decided against investing its foreign exchange reserves in bitcoin due to its risks.
The Czech National Bank had created a $1 million test portfolio including bitcoin, a USD stablecoin, and a tokenized deposit to gain hands-on experience with blockchain-based assets and their potential impact on the country's financial systems.