"Jane Street Dumping" claims debunked? K33 Research analyzes the price discovery mechanism in the ETF era

Over the past week, a dramatic theory has circulated in the crypto community: that top global market maker Jane Street systematically sells Bitcoin around the daily US stock market open (10:00 AM Eastern Time), artificially suppressing the price to accumulate ETF shares at lower levels. This theory attributes Bitcoin’s decline from a high of $125,000 in October 2025 to $62,000 in 2026 solely to a single institution’s “targeted operation.” However, as more data and industry voices emerge, this seemingly plausible narrative faces systematic refutation.

Background and Timeline of Controversy: Lawsuits, Speculation, and Data Gaps

The rise of this rumor is closely linked to recent legal disputes involving Jane Street. The liquidation manager of Terraform Labs filed a lawsuit in Manhattan federal court, accusing Jane Street of front-running liquidity withdrawals via insider information just before the 2022 UST collapse. Although this lawsuit has no direct connection to spot Bitcoin trading, in the trust-sensitive crypto market, it is enough to cast Jane Street as a “prime suspect” in the next price fluctuation.

Social media users link the Terraform lawsuit to an observable market phenomenon: multiple brief sharp drops in Bitcoin during US market open hours from late 2025 to early 2026. As details of the lawsuit are revealed, some claim that this “10 o’clock dump” behavior has “miraculously disappeared,” leading to reverse inferences that Jane Street is behind the scenes.

Data and Structural Analysis: Why Hedge Activities Are Misinterpreted as “Price Suppression”

Data Does Not Support Systematic Selling

Macro analyst Alex Kruger reviewed IBIT trading data, showing that since January 1, 2026, Bitcoin’s cumulative return during the 10:00–10:30 AM window was +0.9%, while the 10:00–10:15 AM segment saw a slight 1% decline. He states this is market noise, not evidence of repeatable manipulation. Dragonfly partner Rob Hadick also pointed out that if institutions were truly dumping daily, it would be inexplicable that Bitcoin was “actually rising” during that period.

Natural Outcomes of ETF Mechanisms

To understand this phenomenon, it’s essential to clarify the core functions of Authorized Participants (APs). Their role is to anchor ETF share prices to the net asset value (NAV) through creation and redemption mechanisms. During this process, they hedge inventory risk by buying and selling spot Bitcoin, futures, or other derivatives. These hedging activities naturally concentrate during high-liquidity periods (like market open) to reduce execution costs. Therefore, price fluctuations at open are more a byproduct of risk management workflows than price manipulation.

K33 Research notes that the current market is in an extreme consolidation phase: on February 6, Bitcoin spot trading volume hit a record $32 billion in two days; perpetual funding rates plunged to -15.46%, and options skew entered “extreme defensive territory.” These data points collectively suggest the market is undergoing macro deleveraging and position unwinding, not targeted suppression by a single entity.

Industry Perspectives: How Experts View the Controversy

Mainstream industry opinions show high consensus regarding the Jane Street allegations:

• Causality Mismatch: Julio Moreno, head of research at CryptoQuant, argues that the theory overlooks a more fundamental driver—since October 2025, spot demand for Bitcoin has sharply declined, with institutional investors reducing ETF exposure for five consecutive weeks, net outflows totaling about $4.5 billion.
• Alternative Explanation: On-chain analyst James Check points out that actual selling pressure comes from long-term holders taking profits, not market makers maliciously dumping.
• Questionable Motive: Rob Hadick adds that the profit model of large market makers depends on spreads and liquidity provision; systematic price suppression lacks long-term business logic. “Unfortunately, more people have been selling Bitcoin recently than buying, and people just need a scapegoat.”

Examining the Narrative’s Validity: Why Do “Conspiracy Theories” Always Find Soil?

Despite weak evidence, such rumors spread widely, reflecting a deeper issue in the ETF era: the opacity of price discovery mechanisms.

In cash-based creation and redemption models, ETF capital flows and spot buying are clearly linked. But since the SEC approved physical Bitcoin ETP creation and redemption in 2025, APs have gained greater flexibility in delivering underlying assets. They can manage exposure via futures, swaps, and other derivatives, making it difficult for outsiders to distinguish whether ETF capital flows represent genuine spot demand or are merely market maker inventory adjustments or basis arbitrage.

Park notes that 13F filings only disclose long positions, not short positions or derivatives hedges, meaning the “visible institutional holdings” may only be half of the full risk exposure. This “visible inventory, invisible hedge” state leaves room for various conspiracy theories.

Industry Impact: The Shift of Price Discovery Power

The bigger significance of the Jane Street controversy is that it forces the market to confront a structural trend: the center of Bitcoin price discovery is shifting from on-chain spot markets to regulated derivatives exchanges.

Research from K33 and others shows that CME Bitcoin futures open interest has become a dominant reference point, serving as a key pricing anchor for ETF hedging activities. Traditional financial institutions prefer to establish and adjust risk exposure on compliant venues like CME, leading to a growing correlation between Bitcoin prices and macro assets like Nasdaq and gold.

This means that the so-called “10 o’clock effect” is essentially a resonance of cross-asset rebalancing, futures expiry, and macro data releases at specific times—an inevitable outcome of Bitcoin’s integration into the global macro system, not the plot of any single entity.

Evolutionary Scenarios: From “Who Is Dumping” to “How Is Price Set”

Looking ahead, market participants must prepare for at least three possible trajectories:

• Scenario 1: Gradual transparency improvement. As institutional participation deepens, market makers and APs will increase disclosure of their hedging activities within regulatory frameworks, reducing information asymmetry and the breeding ground for conspiracy theories.
• Scenario 2: Consolidation of derivatives pricing power. Bitcoin’s spot price will increasingly follow CME futures and options implied volatility, with 24/7 on-chain trading ceding influence to traditional institutions during market hours.
• Scenario 3: Regulatory penetration. If extreme volatility reemerges, regulators may impose stricter transparency requirements on market maker hedging, akin to stock market standards, reshaping the price discovery process externally.

Regardless of the ultimate direction, the Jane Street controversy has become a landmark: it marks a maturing market understanding—from a preference for narratives of “manipulation” to a rational effort to understand and deconstruct complex market structures. As K33’s research implies, the real risk isn’t some institution “dumping,” but the market’s ongoing process of learning how to rediscover price in a new paradigm dominated by derivatives, hedging, and macro liquidity.