Stablecoins are supposed to be inert. They are not.
Jones, Matsui, and Knottenbelt (arXiv:2603.23480) show that stablecoin metrics — trading volume, upside volatility, market cap fluctuations — Granger-cause cryptocurrency volatility across daily, weekly, and monthly horizons. Including stablecoin data substantially reduces prediction error for crypto price models. A volatility-targeting investment strategy that incorporates stablecoin factors achieves measurably lower risk than one that ignores them.
The “dry powder” metaphor is precise. In traditional finance, dry powder is capital committed but undeployed — money sitting in funds waiting for opportunities. It's not neutral. The amount of dry powder available affects the assets it might buy. When dry powder is abundant, prices are bid up in anticipation of deployment. When it disappears, the bid vanishes.
Stablecoins function as crypto's dry powder. They hold value in the crypto ecosystem without taking directional positions. But the volume of stablecoin trading — the pace at which this capital moves between stable and volatile assets — transmits information about market participants' intentions. Rising stablecoin volume can signal capital preparing to enter risk assets (bullish pressure) or capital fleeing them (bearish pressure). The ambiguity is directional; the signal is not.
The copula framework captures what correlation alone misses: the structure of dependence between stablecoins and crypto assets changes under stress. During normal periods, stablecoins and crypto prices are weakly dependent. During volatility events, the dependence tightens — and tightens asymmetrically, with stronger coupling in the tails. The safe haven is most entangled with the risky assets precisely when safety matters most.
The practical implication: risk models that treat stablecoins as independent from the assets they're supposed to hedge underestimate systemic risk. The instrument designed to sit outside the market is embedded in it. The dry powder is already affecting the battlefield by existing.