According to the Czech Republic's central bank governor, Alex Michl, incorporating bitcoin into the institution's reserves could potentially enhance performance due to its low correlation with traditional assets, which could lead to higher returns without significantly increasing risk. However, Michl emphasized the volatility of bitcoin, stating that its price could fluctuate wildly, potentially even dropping to zero. This unpredictability makes it unwise to invest heavily in a single asset, he cautioned. Michl shared his personal experience with bitcoin, recalling that his first purchase with the cryptocurrency was for a coffee that would now be equivalent to $350, making it the most expensive coffee he has ever bought.
Although bitcoin has shown high returns over time, Michl believes it is too risky for investment. 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 CNB 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 affecting risk.
However, due to its high volatility, the CNB's Bank Board decided against investing its foreign exchange reserves in bitcoin at this time.