From Terra Insider Trading to Daily "10 AM Sell-offs": How Jane Street Disrupts the Crypto Market

In late February 2026, the world’s leading quantitative trading firm Jane Street suddenly found itself at the center of the crypto market storm. First, on February 24, the bankruptcy trustee of Terraform Labs filed an insider trading lawsuit in the U.S. Federal Court, accusing the firm of front-running during the Terra collapse in 2022 by trading on non-public information. Subsequently, a theory circulating within the crypto community for months—about Bitcoin being dumped daily at 10 a.m.—quickly gained traction following the lawsuit’s exposure. Market participants observed that, after the lawsuit news broke, this long-standing pattern of selling pressure during that specific time seemingly “mysteriously” disappeared, and Bitcoin’s price rebounded sharply. This chain of events thrust this mysterious quant giant into the spotlight of market manipulation suspicions.

Aftermath of the Terra Collapse: Timeline and Key Allegations

The incident originated from a federal lawsuit against Jane Street. According to the complaint, Jane Street established a secret communication channel called “Bryce’s Secret” with Bryce Pratt, an intern at Terraform Labs who later joined the firm. The core allegation is that on May 7, 2022, after Terraform Labs withdrew 150 million UST from the Curve liquidity pool without disclosing its intentions, an address associated with Jane Street followed suit and withdrew about 85 million UST within ten minutes.

The lawsuit claims that Jane Street used this non-public information to execute front-running trades before the UST depeg and market panic, avoiding over $200 million in potential losses and accelerating the collapse of Terra’s $40 billion market cap. Jane Street’s spokesperson responded strongly, calling the lawsuit “a reckless attempt to extract money,” and vowed to defend its rights, dismissing the claims as “baseless and opportunistic.”

Notably, this isn’t Jane Street’s first regulatory challenge. In 2025, India’s SEBI accused it of manipulating the Bank Nifty index through “pre-market ramp-up and intraday sell-offs,” resulting in the freezing of approximately $565 million in assets. This precedent has already cast a shadow of doubt over its activities in the crypto space.

Data and Structural Analysis: Is the “10 a.m. Dump” Fact or Illusion?

As the lawsuit gained momentum, the crypto community began linking Jane Street to the unusual Bitcoin sell-offs observed around 10 a.m. Eastern Time (just before U.S. stock market opens) over the past few months. An account called “Whale Factor” on X (formerly Twitter) pointed out that since November 2024, Bitcoin often declined by 2-3% within minutes after U.S. stock market open, speculating that this was related to Jane Street’s role as one of BlackRock’s largest authorized participants (APs). Supporters argued that after the lawsuit was announced, this phenomenon ceased immediately, with Bitcoin rising about 10% in a single day—seen as indirect “evidence.”

However, this popular narrative was strongly challenged by data. Vetle Lunde of K33 Research released an analysis showing that from January 2025 to February 2026, Bitcoin’s average minute returns at 10:00 a.m. were actually in the top 25% of daily performance. He further explained that Bitcoin’s volatility peaks typically occur around macroeconomic data releases and U.S. market open (09:31–09:37), driven by market microstructure and close ties to U.S. equities, rather than targeted manipulation at a specific time.

Economist Alex Krüger shared similar views. His analysis indicated that in the first 15 minutes of IBIT trading, Bitcoin averaged about a 1% decline, followed by an average rebound of 0.9% over the next 30 minutes. He considered this more akin to “statistical noise,” noting that these movements are highly correlated with the Nasdaq index, suggesting Bitcoin’s volatility is part of broader risk asset trends. Rob Hadick of Dragonfly Partners dismissed the discussion as “somewhat foolish,” pointing out that APs’ daily role is to keep ETF prices aligned with their net asset value through buying and selling, often during high liquidity periods, which can be misinterpreted as targeted suppression.

Public Opinion Breakdown

The debate has polarized market views:

One camp, the “manipulation skeptics,” mainly on-chain analysts and retail traders, firmly believe that the lawsuit’s exposure and the disappearance of the “10 a.m. dump” are causally linked. Negentropic, a co-founder of Glassnode, explicitly stated that the daily crashes stopped after the lawsuit was made public. They argue that Jane Street, as one of the few APs capable of physical redemption, has both the motive and ability to push down spot prices to trigger liquidations, then buy back at lower levels, or profit from undisclosed derivatives short positions.

The other camp, “market structure defenders,” mainly institutional professionals and economists, emphasize that the allegations stem from a misunderstanding of ETF market-making mechanics. Jeff Park of Bitwise explained that APs are exempt from certain regulations when redeeming shares and do not need to buy or sell Bitcoin immediately, leaving a “gray window” for hedging and arbitrage. Ryan McMillin of Merkle Tree Capital added that APs tend to hedge with futures; when futures are in contango, arbitrage limits spot price increases, and when they unwind, it can exacerbate declines—often misread as “whale dumps.”

Scrutinizing the Narrative’s Authenticity

In this controversy, it’s crucial to distinguish facts, opinions, and speculation:

Facts: Terraform’s bankruptcy trustee has filed an insider trading lawsuit against Jane Street, accusing it of trading on non-public information in 2022. Jane Street denies these allegations. Additionally, Bitcoin has indeed experienced frequent declines around 10 a.m. during certain periods.

Opinions: Many market participants directly link these two events, believing Jane Street’s manipulation caused the “10 a.m. dumps.”

Speculation: Some analysts suggest that the billions of dollars in Bitcoin ETF long positions disclosed in 13F filings might be hedged with undisclosed OTC derivatives short positions, resulting in a negative net position and profiting from price drops. This remains purely speculative, lacking public evidence. As Rob Hadick noted, there’s no public proof that Jane Street has malicious intent to manipulate Bitcoin prices.

Industry Impact Analysis

Regardless of the lawsuit’s final outcome, this incident has already had a profound impact on the industry. It has significantly advanced market education, prompting investors to better understand the complexities of Bitcoin spot ETFs, especially the role of APs, physical redemptions, and the potential influence of futures hedging on spot prices.

Furthermore, it has intensified scrutiny of large quantitative institutions’ roles in crypto markets. Jane Street, as Coinbase’s main liquidity provider, a major shareholder in several mining firms, and an investor in multiple DeFi projects, is under close watch. Widespread suspicion of market manipulation reflects a broader market psychology seeking scapegoats during downturns and exposes the limitations of current disclosure frameworks, such as 13F filings that only reveal long positions.

Possible Future Scenarios

The evolution of this event could follow three main paths:

Scenario 1: Regulatory and legal escalation. If the New York Federal Court’s investigation deepens or regulators in India or China make progress, Jane Street could face stricter compliance scrutiny, fines, or trading restrictions. This might force other quant giants to reassess their risk exposure and compliance costs globally, potentially reducing market liquidity in the short term.

Scenario 2: Narrative cooling and macro focus. If no concrete evidence supports manipulation and Bitcoin’s price resumes correlation with macro risk assets like the Nasdaq, the “10 a.m. dump” story may fade. Investors would then refocus on Federal Reserve policies, inflation data, and macro fundamentals.

Scenario 3: Industry transparency enhancement. This controversy could serve as a catalyst for regulatory reforms, prompting authorities to require market makers to disclose more comprehensive risk exposures, including key derivatives hedges, leading to clearer visibility of actual fund flows and institutional intentions.

As of February 27, 2026, according to Gate data, Bitcoin’s price has rebounded after this event-driven rally, but market sentiment remains complex. The truth may still be hidden behind intricate ETF mechanisms and undisclosed derivatives books, but one thing is certain: understanding market microstructure has become an essential skill for every market participant.