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Is Bitcoin A Hedge Against Central Banking? Evidence from AI-Driven Monetary Policy Expectations

Author

Listed:
  • Maxime L. D. Nicolas
  • Franc{c}ois Sicard
  • Marion Laboure
  • Zixin Sun
  • Anah'i Rodr'iguez-Mart'inez

Abstract

This study investigates the transmission of monetary policy narratives to Bitcoin prices, distinguishing the impact of ex-ante expectations from ex-post interest rate implementation. We introduce a high-frequency Monetary Policy Expectations (MPE) index, using a Large Language Model (LLM)-based classification of 118,000+ market messages to achieve a precise hawkish/dovish decomposition. Results from a framework combining Long Short-Term Memory (LSTM) networks with SHapley Additive exPlanations (SHAP) indicate that Bitcoin functions as a sensitive barometer of central bank signaling; specifically, hawkish narratives consistently trigger negative price responses independently of actual Federal Funds Rate adjustments. We demonstrate that the MPE index Granger-causes Bitcoin returns at short-to-medium horizons, establishing linear predictive causality, while the LSTM-SHAP framework reveals pronounced non-linear, macroeconomic regime-dependent interactions. These findings highlight Bitcoin's structural sensitivity to global monetary discourse, establishing LLM-derived sentiment as a potent leading macroeconomic indicator for the digital asset landscape.

Suggested Citation

  • Maxime L. D. Nicolas & Franc{c}ois Sicard & Marion Laboure & Zixin Sun & Anah'i Rodr'iguez-Mart'inez, 2026. "Is Bitcoin A Hedge Against Central Banking? Evidence from AI-Driven Monetary Policy Expectations," Papers 2604.08825, arXiv.org.
    • Handle: RePEc:arx:papers:2604.08825
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    References listed on IDEAS

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