Stablecoins as dry powder: a copula-based risk analysis of cryptocurrency markets
File(s)
Accepted version
Author(s)
Jones, Elliot
Matsui, Toshiko
Knottenbelt, William
Type
Conference Paper
Abstract
While fundamental to Decentralised Finance, stable-coins’ role in transmitting systemic risk remains under-explored. Using copula-based approaches, this study quantifies volatility transmission from stablecoins to cryptocurrencies. We find that stablecoin markets exhibit in-sample causality over various time horizons and reduce out-of-sample error when predicting cryp-tocurrency market movements. We link stablecoin volume and upside volatility to broader market volatility, indicating its role as “dry powder”. Finally, we establish the economic value of these signals by reducing risk in a volatility targeting portfolio.
Date Acceptance
2026-03-18
Publisher
IEEE
Copyright Statement
Subject to copyright. This paper is embargoed until publication. Once published the author’s accepted manuscript will be made available under a CC-BY License in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy).
Source
8th IEEE International Conference on Blockchain and Cryptocurrency
Publication Status
Accepted
Start Date
2026-06-01
Finish Date
2026-06-05
Coverage Spatial
Brisbane, Australia