Jane Street Lawsuit Sparks Bitcoin Rally as '10 a.m. Dump' Pattern Disappears, Analysts Eye ETF Market Mechanics

Bitcoin surged over 8% to briefly top $70,000 on February 25, 2026, adding more than $170 billion to the total cryptocurrency market cap, as traders pointed to the sudden disappearance of a persistent “10 a.m. dump” selling pattern following a federal insider trading lawsuit against quantitative trading firm Jane Street.

The rally, which saw Ethereum gain 13% and Solana surge 15%, has renewed scrutiny of how authorized participants hedge Bitcoin ETF shares, with analysts noting that derivatives activity can decouple ETF inflows from spot market buying pressure.

Lawsuit Alleges Jane Street Used Terraform Insider Information

The lawsuit was filed this week by the administrator overseeing the liquidation of Terraform Labs. The complaint alleges that Jane Street, one of Wall Street’s most influential market makers, used non-public information obtained from Terraform insiders to front-run trades tied to the $40 billion collapse of the Terra-Luna ecosystem in May 2022.

According to court documents, the scheme centered on a former Terraform intern who later joined Jane Street. The individual allegedly maintained a private chat group that included Terraform software engineers and business development personnel, creating a channel for transmitting confidential information back to Jane Street.

The most damning allegation involves timing. On May 7, 2022, at approximately 5:44 p.m. ET, Terraform secretly withdrew 150 million TerraUSD (UST) from the Curve 3pool, a major liquidity pool for stablecoin swaps. Within 10 minutes—before any public announcement—a wallet allegedly linked to Jane Street extracted another 85 million UST from the same pool. The complaint argues these trades were impossible without insider knowledge of Terraform’s liquidity operations.

Jane Street has denied all allegations, calling the lawsuit “desperate” and “a transparent attempt to extract money” from the company to compensate for losses caused by Terraform’s own management. The firm maintains that the Terra-Luna collapse resulted from “multi-billion dollar fraud” perpetrated by Terraform leadership.

The lawsuit also names Jane Street co-founder Robert Granieri, trader Michael Huang, and the former intern as defendants. This action follows a similar $4 billion lawsuit filed against Jump Trading in December 2025, alleging that firm also illegally profited from Terraform’s collapse through secret agreements.

‘10 a.m. Dump’ Pattern and Market Reaction

Throughout late 2025 and early 2026, cryptocurrency traders documented a curious pattern: nearly every day at approximately 10 a.m. Eastern time—coinciding with U.S. stock market open—Bitcoin would experience a sharp, predictable sell-off. Social media users dubbed this the “10 a.m. dump” and speculated that a major institutional player was systematically suppressing prices to accumulate at lower levels.

The pattern was sufficiently consistent that numerous crypto analysts began tracking it, with some directly pointing to Jane Street as the alleged perpetrator given its dominant role as an authorized participant for spot Bitcoin ETFs.

Following the lawsuit filing, the pattern abruptly ceased. On February 25, when 10 a.m. ET arrived, Bitcoin ripped higher instead of dumping—posting one of its strongest single-day performances in months.

Crypto commentators noted on social media that an algorithm allegedly dumping Bitcoin every morning at 10 a.m. for months appeared to stop immediately after the lawsuit was filed. Onchain analysts observed that for months, 10 a.m. meant the Jane Street dump, but following the legal action, Bitcoin ripped higher instead.

Bloomberg Senior ETF Analyst Eric Balchunas remarked that the “bogeyman is gone” based on crypto Twitter sentiment and price action, questioning whether eliminating that factor would be sufficient for a sustained rebound.

Understanding ETF Market Mechanics

While the lawsuit has fueled speculation about Jane Street’s trading activities, analysts caution that Bitcoin’s price discovery has become increasingly complex in the ETF era. The relationship between ETF inflows and spot market prices is not mechanical.

Authorized participants—the institutional firms responsible for creating and redeeming ETF shares—operate under regulatory exemptions that allow them to meet ETF demand without forcing immediate spot Bitcoin purchases. These exemptions are designed to support orderly ETF market-making but can create a “grey window” in which ETF share creation, hedging activity, and spot market transactions are not tightly linked in time.

Because Bitcoin futures frequently trade at a premium to spot prices (a condition known as contango), authorized participants may hedge exposure using futures while earning carry from the basis. This means ETF assets under management can balloon without forcing exchange buys, muting rallies below key levels where hype would otherwise push prices higher in a flywheel effect.

When futures positions are reduced—either due to macro shifts or narrowing spreads—the adjustment can amplify price swings, contributing to sharp pullbacks that appear sudden to retail investors.

Analysts stress that this behavior is legal and consistent with how ETFs are designed to operate, and does not imply wrongdoing by any individual firm. Instead, it highlights how Bitcoin’s price discovery is increasingly shaped by institutional trading venues such as futures markets, rather than spot exchanges alone. Some suggest that authorized participants wield hedge-fund-like incentives and tools with less accountability in a volatile, adoption-stage asset, potentially creating an ETF “innovation” that risks becoming a yield-skimming machine for Wall Street prioritizing institutional arbitrage over genuine spot support.

Jane Street’s Regulatory History

The Terraform lawsuit is not the first regulatory scrutiny Jane Street has faced. In July 2025, India’s securities regulator issued an interim order alleging that entities linked to Jane Street manipulated an index through coordinated activity in spot and derivatives markets.

The regulator’s theory alleged a cross-market strategy: supporting the index by trading constituent stocks while holding large options positions, profiting in derivatives markets, then reversing the operation. A record penalty was imposed, which Jane Street disputed with plans to appeal.

This history has contributed to market participants’ willingness to entertain theories about Jane Street’s Bitcoin trading activities, though no evidence has emerged linking the firm to systematic price suppression in crypto markets.

Broader Market Context

Wednesday’s rally occurred amid improving risk sentiment across global markets. The total cryptocurrency market cap rose approximately 8% to nearly $2.5 trillion. Bitcoin climbed from below $65,000 to briefly exceed $70,000 before settling near $68,800.

Ethereum gained more than 12% to trade above $2,080, while Solana surged over 11%. The moves coincided with a weaker U.S. dollar and strength in Asian equity markets, with the MSCI Asia index hitting fresh highs.

However, analysts remain cautious about sustainability. Onchain data indicates that nearly 9 million Bitcoin—approximately 45% of circulating supply—is held at prices below current levels, creating overhead supply that could cap rallies. Some traders suggest that until Bitcoin reclaims $75,000, it’s difficult to see many taking this rally seriously.

FAQ: Understanding the Jane Street Lawsuit and Market Impact

Q: What exactly is Jane Street accused of in the Terraform lawsuit?

A: The lawsuit alleges Jane Street used non-public information obtained from Terraform insiders through a private chat group to front-run trades ahead of the Terra-Luna collapse. Specifically, the complaint claims that minutes after Terraform secretly withdrew $150 million UST from a liquidity pool on May 7, 2022—before any public announcement—a wallet linked to Jane Street extracted another $85 million from the same pool, allowing the firm to exit positions before the crash.

Q: Is there evidence that Jane Street was behind the “10 a.m. dump” pattern?

A: No public evidence definitively links Jane Street to the observed 10 a.m. selling pattern. The connection is purely speculative, based on Jane Street’s prominent role as an ETF authorized participant and the timing coincidence that the pattern ceased following the lawsuit. Both analysts and the company have emphasized that no trading data or regulatory findings support the allegation of systematic price manipulation.

Q: How do Bitcoin ETF mechanics affect price discovery?

A: Authorized participants can create and redeem ETF shares without immediately buying or selling Bitcoin on public exchanges, under regulatory exemptions designed for orderly market-making. They may also hedge using futures contracts, particularly when futures trade at a premium to spot, which can decouple ETF inflows from spot buying pressure. This means ETF demand doesn’t always translate directly into price movement, and hedging adjustments can amplify volatility.

Q: What is Jane Street’s history with regulators?

A: Jane Street is currently defending against the Terraform insider trading lawsuit. In July 2025, India’s securities regulator issued an interim order alleging market manipulation in index trading, though Jane Street disputes the findings. The firm has no prior regulatory actions related to cryptocurrency markets.

Q: Could the 10 a.m. pattern have had a legitimate explanation?

A: Yes. ETF hedging activity, institutional position adjustments, and options market dynamics can create predictable intraday flows without any manipulative intent. The pattern’s disappearance could reflect normal changes in market structure or participant behavior rather than the cessation of alleged manipulation.