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 embroiled in legal disputes with Terraform Labs and faces severe accusations in the crypto market, a fascinating phenomenon occurs: the precise “10 a.m. sell-off” 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 stokes the fire, accusing Jane Street of being the mastermind behind the “10 a.m. sell-off.”

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 large sell orders. This phenomenon is colloquially called the “10 a.m. sell-off strategy.”

However, this is not just a normal correction. The sell pressure usually floods in within half an hour after the open, quickly breaking through the market’s liquidity depth, triggering a series of leveraged long liquidations. Prices panic to intraday lows, then gradually stabilize. 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 the US stock market open to create a price crash, thereby reducing the cost of subsequent accumulation. In traditional finance, this behavior is called “wash trading” or “price manipulation,” aiming to profit from the market’s structural fragility.

Fuel for conspiracy theories was further ignited in February 2026. Jane Street’s 13F filings showed a significant increase in holdings of over 71 million shares of BlackRock’s Bitcoin spot ETF (IBIT) in Q4 2025, totaling 203.15 million shares worth about $790 million.

When this data surfaced, social media exploded: since Jane Street is accumulating Bitcoin on a large scale, isn’t the 10 a.m. sell-off just to lower the cost of building positions?

A logical chain seems to emerge: motive (accumulation) + method (algorithm) = the culprit (Jane Street). However, Louis LaValle, CEO of Frontier Investments, poured cold water on this: viewing the 13F disclosures as mere “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—deterring sell-off algorithms

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 allegations from India’s Securities and Exchange Board (SEBI) for manipulating the BANKNIFTY index, resulting in a $550 million fine.

Suddenly, the spotlight of law was turned on. Remarkably, after the lawsuit became public, the regular morning 10 a.m. sell pressure significantly eased or even disappeared. It’s hard to attribute this solely 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 pushes algorithms toward self-restraint, shifting from “aggressive profit pursuit” to “compliance and risk avoidance,” which may directly lead to the breakdown of certain sell-off patterns.

The disappearance of the “10 a.m. sell-off” phenomenon confirms its existence and its close relation to regulatory pressure. But does this prove it was an exclusive strategy of Jane Street?

The answer remains ambiguous, but one thing is certain: when regulators scrutinize market makers’ internal operations, certain borderline trading behaviors are forced to cease under compliance pressures.

The 10 a.m. sell-off contradicts market-making logic, making conspiracy theories less plausible

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 unilaterally depress Bitcoin’s price.

While IBIT’s trading price is anchored to Bitcoin, its core is still a secondary market stock. If IBIT trades at a significant discount, APs and arbitrageurs will quickly step in, buying low and redeeming Bitcoin in the primary market to arbitrage away 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 does not come from price increases or decreases 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 a.m. to 10:30 a.m. Eastern Time has been 0.9%.

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

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

Structural issues in Bitcoin spot ETF price discovery

While technical skeptics dismiss conspiracy theories, Jeff Park, CIO of ProCap, believes the root cause lies in the current AP mechanism for Bitcoin spot ETFs.

The key is the special legal status of APs, which allows them to significantly influence prices. Under SEC regulation, institutions like Jane Street enjoy privileges that ordinary traders do not:

• Exemption from short sale restrictions: APs, in market-making roles, often are not bound by standard short-selling limits. They can sell ETF shares without borrowing the underlying Bitcoin and hedge via futures instead of buying spot;
• 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 Bitcoin’s price discovery function. The deeper issue is the “cash” mode itself. Bitcoin held by APs remains in custody wallets for only a very short time, mostly “locked” in cold storage. PANews believes this “lock-up” 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 risk through futures rather than direct spot purchases.

The result is that even if ETF inflows appear substantial, the real buying in the spot market does not necessarily reflect this.

PANews believes that when APs like Jane Street use short sale exemptions to hedge via futures, they are essentially creating a “synthetic” demand for Bitcoin. This leads to ETF capital inflows that may not translate into actual upward pressure on the spot price, objectively exerting a “flexible suppression” on Bitcoin’s price.

This structural mismatch creates a paradox: the larger the ETF, the more concentrated the price discovery power becomes in a few APs, with Jane Street being one of the central nodes.

Quantitative industry as a market ceiling?

“Quantitative never dies, it only deepens.”

The idea that “quantitative industry suppresses A-shares’ rise” is widespread on social media, even accused of being exploited by hedge funds like Fantasia, which uses advanced AI and “dimensionality reduction” algorithms to “harvest liquidity” in secondary markets—though such claims are often emotional venting.

A profound question is posed: Is quantitative investing an “evolution of market civilization,” or an “invisible suppressor” hindering 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 less mature A-shares market has seen a leap from about 5% to 25–30% in quantitative penetration over the past decade.

Even more astonishing are the results from top quant firms.

Contrary to common belief, even as quantitative trading share and top firms’ 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 rise of quant firms does not necessarily come at the expense of stock market growth.

Rather than quant suppression of upward trends, it has profoundly changed the pace of wealth distribution. In the US, quant strategies have undergone industrialization; in A-shares, they 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 in the face of high-frequency algorithms and complex financial engineering. Quantitative strategies will not disappear; they will become part of the market’s breathing process.

For crypto players, instead of searching for a “villain,” it’s better to track the evolution of ETF mechanisms. Understanding how this “Wall Street-created money machine” operates is a must for every investor.

Conspiracy theories are always more sensational 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.