Truth Unveiled: ETF Mechanism Suppresses Price Discovery, Jane Street Becomes the Scapegoat for Bitcoin's "10-Point Dump"

Author: Jae, PANews

Conspiracy theories often spread more easily than the truth, and this is true in the crypto world as well. Especially during periods of sideways price movement and market anxiety. When Bitcoin repeatedly struggles below $70,000, and every US stock trading day encounters strange selling pressure at 10 a.m., investors can’t help but suspect a mysterious hand manipulating the market.

As Jane Street becomes entangled in legal disputes with Terraform Labs and faces severe accusations in the crypto market, a fascinating phenomenon occurs: the precise “10 a.m. dump” scene, as accurate as a clock, mysteriously disappears. This New York-based quantitative trading giant, known for its low-profile approach and high-frequency algorithms, happens to be an authorized participant (AP) in top Bitcoin spot ETFs like BlackRock and Fidelity.

On social media, Jane Street has been identified as the culprit hiding behind algorithms, pressing the “sell button” precisely at 10 a.m. every day. Through systematic analysis, PANews finds that Jane Street is not the true culprit behind Bitcoin’s price decline, but it has indeed become a projection target for market anxiety—a powerful, mysterious, and suitable scapegoat to play the “villain.”

Social media fuels the fire, accusing Jane Street of being the mastermind behind the “10 a.m. dump.”

The story begins with a simple observation. Since November 2025, sharp traders have noticed that around 10 a.m. Eastern Time, shortly after US stock markets open, Bitcoin spot ETFs always face a wave of abnormal large sell-offs. Market insiders call this the “10 a.m. dump strategy.” However, this isn’t just a normal correction. The sell-off usually floods in within half an hour after opening, quickly breaking through liquidity depth, triggering a series of leveraged long liquidations. Prices panic to intraday lows before gradually stabilizing.

This highly consistent “timestamp” hints at algorithmic involvement. Milk Road points out that the underlying logic of this operation is exploiting the thin liquidity early in US stock market open to create a price crash, reducing the cost of subsequent accumulation. In traditional finance, this behavior is called “wash trading” or “price manipulation,” aiming to profit from structural market vulnerabilities.

The conspiracy theory was further fueled in February 2026. Jane Street’s 13F holdings report showed a significant increase in its position in BlackRock’s Bitcoin spot ETF (IBIT), adding over 7.1 million shares in Q4 2025, totaling 20.315 million shares worth about $790 million.

Once the data was released, social media exploded: since Jane Street was accumulating Bitcoin massively, wasn’t the 10 a.m. dump just to lower the cost of building positions? A logical chain seems to emerge: motive (accumulation) + method (algorithm) = culprit (Jane Street). However, Louis LaValle, CEO of Frontier Investments, poured cold water: viewing the 13F disclosure as merely “long accumulation” is a fundamental misunderstanding of market-making business models.

As a primary market maker and AP for IBIT, Jane Street’s ETF holdings are more likely to be for balancing its options positions or executing hedging strategies, rather than a one-sided bet.

The disappearing strategy amid legal storms and regulatory spillover

If the 13F data only caused market misinterpretation, the subsequent phenomena add empirical weight to this debate. On February 24, Terraform Labs’ liquidator Todd Snyder filed a lawsuit accusing Jane Street of using a private communication channel with Terraform insiders (former intern Bryce Pratt) to precisely unwind positions hours before the Terra ecosystem collapse in May 2022, allegedly involving insider trading and market manipulation.

Almost simultaneously, Jane Street faced accusations from India’s Securities and Exchange Board (SEBI) for manipulating the BANKNIFTY index, resulting in a $550 million fine. The spotlight of law suddenly shone brightly.

Remarkably, after the lawsuit became public, the regular morning 10 a.m. selling pressure significantly eased or even disappeared. Hard to attribute this to coincidence. PANews believes that in financial engineering, when trading strategies are widely recognized or questioned by regulators, their profit margins (alpha) tend to diminish rapidly. Increased regulatory risk forces algorithms to self-restrain, shifting from “aggressive profit-seeking” to “compliance and risk avoidance,” which may directly lead to the breakdown of certain dump patterns.

The disappearance of the “10 a.m. dump” phenomenon confirms its existence and its high correlation with regulatory pressure. But does this prove it was Jane Street’s “exclusive strategy”? The answer remains ambiguous, but one thing is certain: when regulators scrutinize market makers’ internal operations, some gray-area trading behaviors are forced to cease due to compliance pressures.

The “10 a.m. dump” defies market-making logic; conspiracy theories may be hard to sustain

Although the community tends to blame a single entity for price declines, conspiracy theories claiming Jane Street “deliberately suppresses Bitcoin prices” are fundamentally unconvincing to opponents. Keone Hon, former quant at Jump Trading, and Julio Moreno, head of research at CryptoQuant, provided strong technical rebuttals.

Keone Hon pointed out that shorting IBIT alone cannot easily push Bitcoin prices down. While IBIT’s trading price is anchored to Bitcoin, its essence remains a secondary market stock. If IBIT trades at a significant discount, APs and arbitrageurs will quickly intervene by buying low and redeeming Bitcoin in the primary market to arbitrage the spread. This arbitrage mechanism prevents IBIT from decoupling from the spot price downward.

Julio Moreno argued that Jane Street’s operations are similar to any “delta-neutral” fund. “Real large market makers do not bet on the direction,” said Xin Song, CEO of GSR Markets, a leading crypto market maker, in an interview with PANews.

Indeed, for market makers like Jane Street, taking directional risk is extremely dangerous. They pursue a “net risk exposure of zero” balance. When providing liquidity as an AP for IBIT, they face ongoing inventory risk. If clients buy large amounts of IBIT, Jane Street, as the seller, needs to hold a short position. To hedge this, they typically buy equivalent Bitcoin in spot or futures markets—this is called “dynamic hedging.”

In this model, Jane Street’s profit doesn’t come from price movements but from:

• Bid-ask spread: earning from buying slightly lower and selling slightly higher;
• Funding rate arbitrage: buying ETF spot and simultaneously selling futures contracts on CME or similar, locking in riskless basis gains (basis trade).

Although both strategies involve substantial selling, they are offset by equivalent buying, making the net market impact theoretically neutral. Macro analyst Alex Krüger also presented data refuting this: since January 1, IBIT’s cumulative return from 10 to 10:30 a.m. Eastern Time has been 0.9%.

PANews believes that from a quantitative perspective, the “10 a.m. dump” is more likely triggered by the surge in hedging demand caused by opening volatility in the US stock market. Since IBIT’s liquidity is in a restructuring phase early in the market open, this hedging amplifies into price manipulation.

In reality, giants like Jane Street have enormous balance sheets. If Bitcoin prices collapse due to their manipulation, their own billions of dollars in related assets and derivatives positions would also face extreme liquidity and counterparty risks.

Structural issues in Bitcoin spot ETF price discovery

While technical advocates dismiss conspiracy theories, Jeff Park, CIO of ProCap, believes the root problem lies in the current AP mechanism of Bitcoin spot ETFs. The key is their special legal status. As APs, firms like Jane Street enjoy privileges under SEC regulation:

• Exemption from short-selling restrictions: In market-making, they often are not subject to usual short-sale constraints, allowing them to sell ETF shares without borrowing the underlying Bitcoin, using futures for hedging instead;
• Cash creation/redemption mode: Most Bitcoin spot ETFs currently use a “cash creation/redemption” process, quite different from traditional “physical” models like 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 issue is the “cash” mode itself. Bitcoin held by APs remains in custody wallets for a very short time, mostly “locked” in cold storage. PANews believes this “locked” state reduces circulating supply but also disconnects ETF prices from the spot market.

Ideally, ETF demand should directly transmit to the spot market. But due to the presence of APs, this transmission is mediated. APs often hedge via futures rather than directly buying Bitcoin spot. The result is that even if ETF capital flows in, the actual buying in the spot market does not keep pace, leading to a “soft” price suppression.

PANews further argues that when APs like Jane Street use short-selling exemptions to hedge via futures, they are essentially creating a “synthetic” demand for Bitcoin. This can cause ETF capital inflows to not translate into proportional spot price increases, objectively exerting a “flexible” downward pressure on prices. This structural mismatch results in a paradox: the larger the ETF, the more concentrated the Bitcoin price discovery power becomes among a few APs, with Jane Street being a central node.

Quantitative industry as a market ceiling?

“Quantitative never dies; the decline never stops.” The idea that “quantitative industry suppresses A-shares’ rise” is widely circulated on social media, even accused of being exploited by private equity giants like Fantasia behind DeepSeek: on one hand, using cutting-edge AI to “glorify” the model field, and on the other, employing “dimensionality reduction” algorithms to “harvest liquidity” in secondary markets. But these claims are mostly emotional venting.

A profound question is posed: Is quantitative investing an “evolution of industrial civilization” or an “invisible suppressor” of healthy stock market growth? Today, over 70% of US stock trading is algorithmic (including high-frequency trading, algorithmic execution, and quantitative hedging). In contrast, the slightly less mature A-shares market has seen quantitative penetration jump from 5% to about 25–30% over the past decade.

Even more astonishing are the results from top quant firms.

Contrary to common perception, even as quantitative trading share and top institutions’ returns grow annually, the S&P 500 has gained about 260% over the past decade, while the Shanghai and Shenzhen 300 Index has only increased by around 60%.

This shows that the growth of quant firms does not necessarily come at the expense of the overall market. Instead, quantitative strategies have profoundly changed the pace of wealth distribution. In the US, quant has undergone industrialization; in A-shares, it may still be in a painful transition; and in crypto markets, quant giants are reconstructing pricing power through structural tools like ETF AP mechanisms.

The so-called “suppression” feeling is essentially a sense of powerlessness of traditional investing methods faced with high-frequency algorithms and complex financial engineering. Quantitative strategies will not disappear; they will become part of the market’s breathing.

For crypto players, rather than seeking a “villain,” it’s more important to track the evolution of ETF mechanisms. Understanding how this “Wall Street-created money machine” operates is a must-know for every investor.

Conspiracy theories are always more viral than the truth because they are simple, direct, and emotionally appealing. But real markets are far more complex and often more boring. The true enemy may never be a single institution but our neglect of complex mechanisms and our craving for simple answers.