The Extremity Premium: Sentiment Regimes and Adverse Selection in Cryptocurrency Markets

Abstract

Multi-scale sentiment analysis framework for agent-based modeling of cryptocurrency market microstructure. Blends institutional macro signals (ASRI framework) with retail micro signals (CryptoBERT with MC Dropout). In stylized simulation, multi-scale blending reduces volatility from 877% to 5.8% (p=0.013) and spreads from 147 to 3.5 bps (p<0.001) compared to single-source sentiment. Regime-adaptive weighting adjusts macro/micro blend based on detected market conditions.