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Crypto Listens: Asymmetric Reactions to Text-based Signals in Central Bank Communications

Author

Listed:
  • Samuel Kaplan

    (UNC/UDESA)

  • Efstathios Polyzos

    (Zayed University/CAMA Australia)

  • David Tercero-Lucas

    (ICADE/ICAI/Universidad Pontificia Comillas)

Abstract

The growing influence of cryptocurrencies in global financial markets has raise questions about the impact of central bank communications on their price dynamics.This paper investigates how central bank communication affects the behaviour of cryptocurrency markets. Using a dataset of over 6,000 central bank speeches anda broad panel of crypto assets, we quantify sentiment, uncertainty, and fear tone through natural language processing and assess their impact using local projectionmethods. Our results show that positive tone initially depresses returns while raising volatility, whereas uncertainty and fear produce mixed return responses and amplifyprice fluctuations in the short run. Heterogeneity across asset types reveals stronger responses among emerging, high-performing, and non-stablecoin cryptocurrencies.The findings highlight the informational role of central bank narratives in shaping outcomes in speculative and decentralised markets, with important implications forcommunication policy and financial stability monitoring.

Suggested Citation

  • Samuel Kaplan & Efstathios Polyzos & David Tercero-Lucas, 2025. "Crypto Listens: Asymmetric Reactions to Text-based Signals in Central Bank Communications," Working Papers 365, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:365
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/365.pdf
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    More about this item

    Keywords

    Cryptocurrency; Central Bank Communication; Text Analysis; Sentiment Analysis; Monetary Policy;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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