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. In a speech, Michl noted that bitcoin's price could skyrocket or plummet to zero, emphasizing the risk. He acknowledged that all assets carry the risk of losing value, which is why diversification is key. The Czech National Bank's pilot study, which included a $1 million test portfolio with bitcoin, a USD stablecoin, and a tokenized deposit, aimed to gain hands-on experience with blockchain-based assets.
The study 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 raising risk. However, the bank ultimately decided against investing its foreign exchange reserves in bitcoin due to its volatility, despite recognizing its potential for high returns.