Author: Jae, PANews

Conspiracy theories often spread more effectively than the truth, and this is also true in the crypto world.

Especially during periods of sideways price movement and market anxiety. When Bitcoin struggles repeatedly below $70,000, and when every US stock market trading day encounters strange selling pressure at 10 a.m., investors can't help but suspect that a mysterious hand is manipulating the market.

As Jane Street became embroiled in legal disputes with Terraform Labs and faced severe accusations in the crypto market, a strange phenomenon occurred: the clockwork-precise "10 o'clock crash" scenario miraculously disappeared.

This New York-based quantitative trading giant, known for its low profile and high-frequency algorithms, happens to be an Authorized Participant (AP) for top Bitcoin spot ETFs such as BlackRock and Fidelity.

On social media, Jane Street has been identified as the culprit who hides in the shadow of algorithms and presses the "market crash button" every day.

After a systematic analysis, PANews found that Jane Street was not the real culprit behind the Bitcoin price drop, but it did become a projection of market anxiety—a scapegoat powerful enough, mysterious enough, and perfectly suited to play the "villain."

Social media fuels the fire, with Jane Street accused of being the mastermind behind the "10 PM sell-off".

The story begins with an extremely ordinary observation.

Since November 2025, astute traders have noticed that at a specific time after the US stock market opens, around 10:00 AM Eastern Time, Bitcoin spot ETFs consistently experience an unusually large amount of selling pressure. This has been jokingly referred to in the market as the "10 AM sell-off strategy."

However, this was not a typical pullback. Selling pressure typically surges in the first half hour after the market opens, quickly eroding liquidity and triggering a chain reaction of liquidations of leveraged long positions. Prices hit intraday lows amid panic before gradually stabilizing.

This highly consistent "timestamp" made market participants sense the presence of algorithms.

Milk Road points out that the underlying logic of this operation is to exploit the weak liquidity at the beginning of the US stock market opening to create a price crash in order to reduce the cost of subsequent accumulation of shares. This behavior is known as "price slashing" in traditional financial markets, and aims to profit from the structural fragility of the market.

The fuel for conspiracy theories was further ignited in February 2026.

Jane Street's 13F filing shows that it significantly increased its holdings of BlackRock's Bitcoin Spot ETF (IBIT) by more than 7.1 million shares in the fourth quarter of 2025, bringing its total holdings to 20.315 million shares, worth approximately $790 million.

The data caused an uproar on social media: if Jane Street is "accumulating" Bitcoin on a large scale, then isn't dumping the price at 10 o'clock just to lower the cost of building a position?

The logical chain seems to have emerged: motive (acquiring funds) + means (algorithm) = culprit (Jane Street).

However, Frontier Investments CEO Louis LaValle poured cold water on this, stating that viewing 13F disclosures as simply "accumulating long positions" is a fundamental misunderstanding of the market-making business model.

As a major market maker and authorized participant (AP) of IBIT, Jane Street's ETF holdings are more likely used to balance its option positions or implement hedging strategies rather than for unilateral betting.

Strategies that disappeared under the storm of litigation, and algorithms that deterred market crashes due to regulatory spillover.

If the 13F data was merely a market misinterpretation, then the subsequent events added empirical evidence to this debate.

On February 24, Terraform Labs liquidator Todd Snyder filed a lawsuit accusing Jane Street of insider trading and market manipulation for using a private communication channel established with a Terraform insider (former intern Bryce Pratt) to precisely liquidate her holdings in the hours leading up to the collapse of the Terra ecosystem in May 2022.

Around the same time, Jane Street also faced charges from the Securities and Exchange Commission of India (SEBI) in the Indian market for manipulating the Bankn Niffy index, and a subsequent $550 million fine.

The spotlight of the law suddenly shone.

A miraculous thing happened: after the Jane Street lawsuit was made public, the previously regular selling pressure at 10 a.m. significantly eased or even disappeared.

This is hard to explain as a coincidence.

PANews believes that in the field of financial engineering, when a trading strategy becomes widely recognized by the public or faces regulatory scrutiny, its profit margin (alpha) will rapidly decline. Increased regulatory risk will force algorithms to become more self-regulating, shifting from "aggressive profit-taking" to "compliant risk aversion," which may directly lead to the collapse of certain market crash patterns.

The disappearance of the "10 AM sell-off" phenomenon precisely demonstrates that it once existed and was highly related to regulatory pressure. But does this prove that it was Jane Street's "unique strategy"?

The answer remains unclear, but at least one thing is certain: when regulators scrutinize the internal operations of market makers, certain trading activities operating in a gray area will be forced to cease due to compliance pressures.

A market crash at 10 AM contradicts the logic of market making, and conspiracy theories are unlikely to hold water.

While the community tends to attribute the price drop to the misdeeds of a single entity, conspiracy theories that Jane Street "deliberately suppressed Bitcoin prices" are simply untenable in the eyes of the opposition.

Keone Hon, co-founder of Monad and former head of research at quantitative trading giant Jump Trading, and Julio Moreno, offered a strong technical rebuttal.

Keone Hon points out that shorting IBIT is unlikely to unilaterally drive down the price of Bitcoin.

Although IBIT's trading price is pegged to Bitcoin, it is essentially a secondary market stock. If IBIT experiences a significant discount, APs and arbitrageurs will quickly intervene, buying low-priced shares and redeeming them for Bitcoin in the primary market to close the price gap. This arbitrage mechanism means that IBIT cannot decline independently of the spot price.

Julio Moreno, however, believes that Jane Street's operations are no different from any "Delta-neutral" fund.

“Real large market makers don’t bet on direction,” Xin Song, CEO of leading crypto market maker GSR Markets, said in an interview with PANews.

Admittedly, for market makers like Jane Street, taking on directional risk is extremely dangerous; they strive for a balance of "zero net risk exposure."

When Jane Street provides liquidity to IBIT as an AP, they face the risk of constantly changing inventory. If a client buys a large amount of IBIT, Jane Street, as the seller, needs to hold a short position. To hedge this position, they typically buy an equivalent amount of Bitcoin in the spot or futures market. This process is known as "dynamic hedging."

In this model, Jane Street's profits do not come from price increases or decreases, but rather from:

Bid-ask spread: Profiting by buying at a slightly lower price and selling at a slightly higher price;
Funding rate arbitrage: By buying ETF spot and simultaneously selling contracts in futures markets such as CME, risk-free basis income is locked in (Basis Trade).

Although both strategies involve a large number of selling operations, they also correspond to an equal number of buying operations, and theoretically have a neutral impact on the net price of the market.

Macro analyst Alex Krüger also released data to refute this: since January 1, IBIT's cumulative return from 10:00 to 10:30 AM Eastern Time is 0.9%.

PANews believes that, from a quantitative perspective, the "10 AM sell-off" is more likely due to large-scale hedging demand triggered by the opening volatility of the US stock market. Since IBIT's liquidity was in a restructuring phase at the beginning of the trading day, this hedging activity was amplified into price manipulation.

In fact, the balance sheets of giants like Jane Street are quite large. If the price of Bitcoin collapses due to their manipulation, their own billions of dollars in related assets and derivative positions will also face extremely high liquidity and counterparty risks.

The price discovery mechanism of Bitcoin spot ETFs has structural problems.

Although the conspiracy theory has been refuted by technologists, ProCap CIO Jeff Park believes that the root of the problem lies in the current AP (Authorized Participant) mechanism of Bitcoin spot ETFs.

The key to an Associate's (AP) ability to significantly influence prices lies in its unique legal status. As APs, institutions like Jane Street enjoy privileges unavailable to ordinary traders within the SEC's regulatory framework:

Short selling exemption: ETFs (Asset-making Platforms) are often exempt from conventional securities short selling restrictions when performing market-making tasks. This means they can sell ETF units without borrowing physical assets and hedging through Bitcoin futures, rather than buying physical assets.
Cash Model: Most current Bitcoin spot ETFs adopt the "cash creation/redemption" model, which is quite different from the conventional "physical model" (such as gold ETFs).

Jeff Park further pointed out that the AP mechanism may be weakening the price discovery function of the Bitcoin spot market.

The deeper problem lies in the "cash" model itself. Bitcoin stays in AP's hands for a very short time, spending most of its time "locked" in the custodian's cold wallet. PANews believes that while this "locked-up state" reduces the circulating supply, it also severs the direct link between the ETF and the spot market.

Ideally, demand for ETFs should be directly transmitted to the spot market. However, due to the existence of APs (Agents), this transmission process is mediated. APs often hedge their risk through futures contracts rather than by directly buying Bitcoin spot.

The result of this behavior is that although ETFs show net inflows of funds, the actual buying activity in the spot market is not reflected in the same way.

PANews argues that when APs like Jane Street use short-selling exemptions to hedge through futures, they are essentially "synthesizing" demand for Bitcoin. This means that ETF inflows may not translate into an equal amount of upward momentum for spot prices, thus objectively creating a "soft suppression" of prices.

This structural mismatch leads to a paradox: the larger the ETF, the more concentrated the price discovery power of Bitcoin becomes in the hands of a few investment banks. And Jane Street is one of the central nodes in this power structure.

Is industrialization becoming the ceiling for market growth?

"As long as quantitative trading doesn't die, the decline will never stop."

The view that "quantitative industrials are suppressing the rise of A-shares" has been widely circulated on social media. Even the private equity giant Magic Square, the parent company behind DeepSeek, has been criticized: on the one hand, it is using cutting-edge AI technology to "win glory for the country" in the field of modeling, and on the other hand, it is accused of using "dimensional reduction attack" algorithmic tools to "harvest liquidity" in the secondary market. However, this view is more of an emotional venting.

A profound question has been raised: Is quantitative investment an "evolution of industrial civilization" in the market, or an "invisible suppressor" of healthy stock market growth?

Today, algorithmic trading (including high-frequency trading, algorithmic execution, and quantitative hedging) accounts for over 70% of the US stock market. In contrast, the quantitative penetration rate in the relatively immature A-share market has experienced a leapfrog growth over the past decade, from 5% to approximately 25%–30%.

Even more surprising are the results achieved by the top hunters.

Contrary to popular belief, even though the proportion of quantitative trading and the returns of top institutions have increased year by year, the S&P 500 index has risen by as much as 260% in the past decade, while the CSI 300 index has risen by about 60%.

This shows that the growth of quantitative institutions and the steady growth of the stock market are not mutually exclusive .

Rather than saying that quantitative trading has suppressed the market's upward trend, it's more accurate to say that it has profoundly changed the speed of wealth distribution. In the US stock market, quantitative trading has completed an industrial transformation; in the A-share market, it may still be in a period of growing pains; and in the crypto market, quantitative giants are reshaping pricing power through structured tools such as the ETF AP mechanism.

The so-called "sense of oppression" is essentially the powerlessness of traditional investment methods when faced with high-frequency algorithms and complex financial engineering. Quantitative investing will not disappear; it will simply become an integral part of the market's operation.

For crypto enthusiasts, instead of searching for the "villains," it's more important to track the evolution of the ETF mechanism. Understanding the operating logic of this "Wall Street money-making machine" is essential for every investor.

Conspiracy theories always spread more effectively than the truth because they are simple, direct, and appeal to emotions, but the real market is far more complex and boring than conspiracy theories.

The real enemy may never be any particular institution, but rather our neglect of complex mechanisms and our thirst for simple answers.

Alpaca: After receiving community feedback, it has decided not to issue additional tokens

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