belfast, the word hillbilly apparently came from an article in the NY Journal, 1900.
"In short, a Hill-Billie is a free and untrammeled white citizen of Alabama, who lives in the hills, has no means to speak of, dresses as he can, talks as he pleases, drinks whiskey when he gets it, and fires off his revolver as the fancy takes him."
No prior mention of the term has been found; this humorously slanted article was the first to use it. By 1911, the spelling became hillbilly.

Applied to music, the term hill billie appeared in 1924 in "Talking Machine World" XX, 207/1.

The above from the Oxford English Dictionary, added in the supplement for 1987.

Richie, I agree. Bluegrass did not start with Bill Monroe. It is named for his group, but his music was just one variation on a folk-inspired genre that had roots in the music brought over from Europe- Irish, Scottish, English, Welsh, Manx, Cornish, and even a touch of German and other European (Don't really like the word genre- it is a wide sweep of music that cannot be tied down as classical, parlor, etc.).

Footnote- The Manx are seldom mentioned, but shipping vessels based on the Isle of Man brought thousands of immigrants to North America, not only from the Isles but from mainland Europe. Their lists of passengers are important to those searching for their antecedents.