The mystery of Bitcoin ETF capital inflows and price disconnection: How do authorized participants influence market pricing?

In February 2026, after reaching a historic high of $126,000, Bitcoin experienced a significant correction and is now fluctuating between $62,000 and $70,000. However, in stark contrast to the weak price action, spot Bitcoin ETFs continue to see strong capital inflows, with assets under management in BlackRock’s IBIT once surpassing $54 billion. This “capital hot, price cold” disconnect has brought a group of behind-the-scenes key players—ETF authorized participants—into the spotlight. A heated debate over whether they are deliberately suppressing Bitcoin’s price is brewing both inside and outside the crypto industry.

Market Controversy Overview: Who Is Suppressing Bitcoin’s Price?

Recently, speculation about market manipulation by quant trading giant Jane Street has spread rapidly on social media. Some believe that, as key authorized participants for leading Bitcoin ETFs like BlackRock’s IBIT, Jane Street systematically sells Bitcoin during the U.S. stock market open (around 10:00 PM Beijing time), pushing prices down to accumulate ETF shares at lower prices. This accusation coincides with Jane Street facing lawsuits related to the Terraform Labs collapse, further fueling market suspicion.

However, is it overly simplistic to attribute such complex market dynamics to a single institution’s “conspiracy”? The core of this debate actually touches on a long-ignored systemic “disconnect” within Bitcoin ETF operation mechanisms: why does the inflow of ETF capital not directly translate into buying support for spot Bitcoin?

Background and Timeline: Evolution of Authorized Participants’ Roles

To understand the current controversy, it’s essential to trace the core functions of authorized participants (APs) in the Bitcoin ETF ecosystem.

• January 2024: The U.S. Securities and Exchange Commission (SEC) historically approves the listing of a spot Bitcoin ETF. As primary market makers, APs are responsible for creating and redeeming ETF shares, ensuring that secondary market trading prices stay aligned with the fund’s net asset value (NAV).
• 2024–2025: The Bitcoin ETF’s assets under management grow rapidly, surpassing $100 billion. The list of authorized participants expands to include not only Jane Street but also Wall Street giants like JPMorgan, Goldman Sachs, and Citigroup.
• Late 2025 to early 2026: After Bitcoin hits a new all-time high and then sharply corrects, the market begins to notice that, despite continuous inflows into ETFs, the price response has been underwhelming, sparking widespread discussion about a “disconnect.”
• February 2026: With SEC approval of physical creation and redemption mechanisms and the eruption of speculation around Jane Street, the structural debate over the role of authorized participants reaches its peak.

Data and Structural Analysis: The Truth Behind the “Disconnect” Between Capital Flows and Price

The core issue here is systemic. According to Jeff Park, Chief Investment Officer at ProCap, authorized participants benefit from a key regulatory exemption (Reg SHO), which allows them to engage in market-making without pre-borrowing stocks like typical short sellers. This effectively grants them high capital efficiency and flexibility in position building.

This structure causes a “time lag” or even “break” in the transmission of ETF capital inflows to spot market support:

1. Hedging tools: When APs need to hedge ETF creation units, they can choose to buy spot Bitcoin or use Bitcoin futures and other derivatives. Since futures markets often trade at a premium, APs tend to prefer futures for hedging to earn basis gains rather than buying spot directly. This results in “spot never actually being bought.”
2. Physical redemption flexibility: With SEC approval of physical creation and redemption, APs can deliver Bitcoin directly for ETF shares without trading on the open market. They can do so via OTC negotiations, with minimal market impact. This “firewall” further decouples ETF growth from price discovery on exchanges.

Fact: Authorized participants have legal operational space to choose futures over spot for hedging, which is standard ETF practice.

Viewpoint: This mechanism prevents ETF asset growth from effectively translating into immediate spot market buying pressure.

Public Opinion and Perspectives: Conspiracy Theory vs. Structural Explanation

Market opinions are divided into two camps regarding the role of authorized participants:

• Mainstream skeptics: Represented by some social media users and influencers, they observe price movements at specific times and suspect that institutions like Jane Street leverage informational and capital advantages to systematically suppress prices for accumulation at lows. Samson Mow, CEO of Jan3, points out that the real risk lies in undisclosed, widespread trading and hedging activities by APs, which could give them near-zero-cost capital.
• Structural explanation advocates: Including Jeff Park of Bitwise, Rob Hadick of Dragonfly, and several ETF analysts, who firmly deny allegations of “malicious manipulation.”
  • Hadick dismisses such discussions as “a bit silly,” emphasizing that APs’ buying and selling are primarily for market-making and hedging to keep prices aligned with NAV, not directional gambling. He even cites data showing that during the supposed “concentrated sell-off” from 10:00 to 10:30, Bitcoin prices were actually rising.
  • Jeff Park highlights that the issue isn’t whether a particular firm is “the villain,” but whether the ETF regulatory framework, designed for traditional assets, is suitable for a new asset class aiming to escape institutional influence. He stresses that what APs can “suppress” isn’t the price itself but the integrity of the price discovery mechanism.

Speculation: If APs widely use regulatory exemptions and derivatives for hedging, Bitcoin’s pricing power is undergoing a systemic shift—from spot exchanges to CME futures and other institutional-dominated arenas.

Reality Check: Who Is Shaping the Market Narrative?

The essence of this debate is a contest over market narrative dominance.

On one side, the rise of “conspiracy theories” reflects retail investors’ anxiety and helplessness amid sharp price swings, simplifying complex issues into “Wall Street manipulation,” which resonates emotionally. On the other, institutions and analysts attempt to steer the discussion back to technical and structural factors, emphasizing market architecture, regulatory rules, and the neutral role of market makers.

It’s important to note that there’s no public evidence indicating any authorized participant has malicious intent or collusion to suppress prices. The observed “patterned selling” is more likely the footprint of multiple institutions executing similar hedging strategies within the same regulatory framework. Personifying systemic issues as a “villain” is easy to spread but unhelpful for understanding the true market evolution.

Industry Impact: How New Roles Are Reshaping the Market Landscape

Regardless of intent, the operational patterns of authorized participants are profoundly reshaping Bitcoin’s market structure.

1. Price discovery shift: Marginal Bitcoin pricing power is moving from traditional spot exchanges to deeper, more professional futures and derivatives markets. ETF capital inflows reflect more of a “allocation demand” rather than “immediate buying power.”
2. Volatility evolution: Despite the price correction from highs, Bitcoin’s volatility continues a long-term decline, approaching levels seen in gold and the S&P 500. This “maturation” aligns with a trading structure dominated by institutions focused on hedging and arbitrage.
3. Changing market participants: While prices are subdued, Bitcoin adoption is advancing on multiple fronts. Registered investment advisors have been net buyers for eight consecutive quarters, with 29 of the top 30 US RIAs holding Bitcoin. Institutions are accumulating at record speeds, mainly through ETF channels, representing millions of ordinary investors indirectly holding via pensions and brokerage accounts.

Multi-Scenario Evolution

Based on current systemic features, the market could evolve along several scenarios:

• Scenario 1: Steady State (more likely)

Existing regulatory and market structures persist. The role of APs becomes further entrenched, with Bitcoin ETFs becoming the standard interface for traditional finance entering crypto. Price fluctuations and ETF capital flows become less correlated, improving market efficiency, though short-term surges driven by spot ETF inflows are less likely. Prices will more reflect macro liquidity and futures positioning.

• Scenario 2: Regulatory Intervention (moderately likely)

In extreme market conditions, regulators (SEC, CFTC) might revisit AP exemptions, imposing stricter disclosure requirements on derivatives positions or new restrictions on physical creation and redemption. This could trigger significant structural adjustments and short-term price shocks.

• Scenario 3: Innovation and Breakthroughs (less likely but impactful)

As Bitcoin gains recognition as a “first-level collateral” (e.g., some banks accepting ETF shares as loan collateral), the market could enter a new credit expansion cycle. Bitcoin would evolve from “digital gold” to a foundational liquidity layer in the financial system, fundamentally rewriting its pricing logic. The micro-strategies of APs would be subsumed by larger macro narratives.

In summary, authorized participants are not malicious villains trying to “suppress” Bitcoin’s price, but their systemic position makes them key players in rewriting market rules. Understanding their strategic logic is crucial to grasping Bitcoin’s future trajectory in the post-ETF era.