Is Bitcoin A Hedge Against Central Banking? Evidence from AI-Driven Monetary Policy Expectations
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.
Cite
@article{arxiv.2604.08825,
title = {Is Bitcoin A Hedge Against Central Banking? Evidence from AI-Driven Monetary Policy Expectations},
author = {Maxime L. D. Nicolas and François Sicard and Marion Laboure and Zixin Sun and Anahí Rodríguez-Martínez},
journal= {arXiv preprint arXiv:2604.08825},
year = {2026}
}