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 volatility poses a significant risk. Michl emphasized that all assets carry the risk of losing value, which is why diversification is crucial. He noted that his first experience with bitcoin was buying a coffee, which, due to bitcoin's fluctuation, became the most expensive coffee of his life.
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 created to gain hands-on 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 increasing risk. However, the bank's board decided against investing its foreign exchange reserves in bitcoin due to its high volatility.