According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the institution's reserves could potentially enhance performance, but its high volatility poses a significant risk. Michl noted that the asset's price can fluctuate drastically, with the possibility of reaching zero. He emphasized that diversification is crucial, as relying on a single asset can be unwise. The Czech National Bank had created a $1 million test portfolio comprising bitcoin, a USD stablecoin, and a tokenized deposit to gain hands-on experience with blockchain-based assets.
Although the study found that bitcoin has low long-term correlation with traditional assets, making it a potentially valuable addition to a portfolio, the bank ultimately decided against investing its FX reserves in bitcoin due to its excessive risk.