Crypto Listens: Asymmetric Reactions to Text-based Signals in Central Bank Communications
Samuel Kaplan,
Efstathios Polyzos and
David Tercero-Lucas
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Samuel Kaplan: UNC/UDESA
Efstathios Polyzos: Zayed University/CAMA Australia
David Tercero-Lucas: ICADE/ICAI/Universidad Pontificia Comillas
No 365, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)
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.
Keywords: Cryptocurrency; Central Bank Communication; Text Analysis; Sentiment Analysis; Monetary Policy (search for similar items in EconPapers)
JEL-codes: D53 E52 E58 G15 O33 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2025-07
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:365
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