Jane Street Lawsuit Triggers Bitcoin Fluctuations: The Morning 10 O'clock Curse Facts and Market Interpretation

In the last week of February 2026, the Bitcoin (BTC) market experienced intense volatility. After weeks of decline, BTC rebounded strongly on February 26, approaching the $70,000 mark. This rebound coincided with a major news event: Terraform Labs’ bankruptcy trustee filed an insider trading lawsuit against global quantitative trading giant Jane Street in the U.S. Federal Court in New York on February 24. Suddenly, the long-standing “10 a.m. Bitcoin crash theory” became a hot topic again in the crypto community. Many speculated that Jane Street was the “behind-the-scenes” actor behind daily sell-offs, linking their alleged misconduct and the disappearance of sell-offs to the recent price surge. This article, based on Gate market data (as of February 26, 2026), aims to clarify the timeline and causal chain of the event, distinguish between objective facts, market opinions, and logical conjectures, and explore its deeper impact on industry structure.

The Reignition of the “Timed Sell-off” Suspicion

The immediate trigger for this event was the lawsuit filed by Terraform Labs’ bankruptcy trustee against Jane Street. According to the complaint, Jane Street was accused of exploiting a secret communication channel established with former interns and internal Terra staff during the Terra ecosystem collapse in May 2022, gaining non-public information such as UST withdrawing liquidity from Curve pools. Subsequently, within less than 10 minutes, Jane Street allegedly withdrew about 8.5 million UST from related addresses, profiting illegally and accelerating the de-pegging of UST and the collapse of the Terra ecosystem.

This legal action unexpectedly brought to the forefront another long-standing market rumor—the “10 a.m. Bitcoin crash theory.” The theory suggests that since 2024, Bitcoin has often experienced precise and rapid declines around 10 a.m. Eastern Time (coinciding with U.S. stock market open hours). Jane Street, due to its special position in the ETF market and high-frequency trading capabilities, is believed to be the executor of this “daily sell-off” pattern. Market observers noted that after the lawsuit was made public on February 24, this so-called “10 a.m. dump” phenomenon mysteriously disappeared, replaced by two consecutive days of significant Bitcoin rallies, with the weekly chart turning green after five consecutive red candles.

Data and Structure: Price Rebound and On-Chain Divergence

Market data shows that the rebound was indeed vigorous. As of February 26, 2026, according to Gate data, Bitcoin (BTC) was trading at $68,503.5, up 4.53% in 24 hours, with a 24-hour trading volume of $1.61 billion. The price recovered from a recent low of $65,202.6, attempting to challenge the $70,000 resistance.

However, a closer look at on-chain data reveals that the market structure does not reflect the optimistic sentiment implied by the price rally. The realized profit and loss ratio (90D-SMA), which measures overall market profitability, remains below 1, indicating a predominantly loss-making environment. Historically, when this indicator falls below 1, the market typically takes months to digest losses and rebuild liquidity. Additionally, large holders with 1,000 to 10,000 BTC have been continuously reducing their holdings, selling nearly 90,000 BTC over the past 12 days, which could pose a potential selling pressure in the future. This suggests that despite the market’s enthusiasm driven by the “lawsuit—disappearance of sell-offs” narrative, net capital inflows and fundamental improvements in holder structure have yet to materialize.

Narrative Examination: Facts, Opinions, and Speculations

Discussions around Jane Street exhibit a typical three-layer structure: facts, opinions, and speculations. Market participants should analyze these carefully.

Facts: The verifiable objective events are: 1) On February 24, 2026, Terraform Labs’ bankruptcy trustee filed an insider trading lawsuit against Jane Street, alleging misconduct during the Terra collapse. 2) After the lawsuit was made public, Bitcoin’s price rebounded significantly, increasing its market cap by approximately $120 billion. 3) Jane Street is an authorized participant (AP) in several Bitcoin spot ETFs, playing a core role in ETF creation and redemption mechanisms and having access to arbitrage opportunities between primary and secondary markets.

Opinions: There is a lot of subjective interpretation based on these facts. The most popular view is that Jane Street has been running a long-standing algorithm that sells Bitcoin precisely at 10 a.m. daily to suppress prices and liquidate retail investors, then buys back at lower prices. The lawsuit’s exposure allegedly forced them to cease this activity, removing ongoing selling pressure. Bloomberg ETF analyst Eric Balchunas also noted that the market has associated the lawsuit with the disappearance of the “threat” of daily sell-offs.

Speculations: Building on opinions, some deep-dive hypotheses attempt to mechanistically explain how Jane Street could manipulate prices. For example, some suggest that although Jane Street discloses large holdings of IBIT stock in 13F filings, this might only be the “tip of the iceberg.” It is speculated that they could hedge via OTC put options, futures short positions, and other derivatives, constructing a net short position to profit from Bitcoin declines. Their role as authorized participants could also allow them to exploit price discrepancies between spot and ETF shares or even actively influence prices to align with their derivative positions. However, these complex hedging and manipulation theories remain speculative, lacking concrete regulatory evidence or transparent trading data.

Market Structure and Manipulation Allegations: Clash and Reflection

Regardless of the lawsuit’s final outcome, this event has already had a significant industry impact. It has unprecedentedly focused public and regulatory attention on the microstructure of spot ETFs. Jane Street’s role—designed as a liquidity provider to ensure ETF price-NAV parity—has now become central to market manipulation suspicions. This raises questions about the transparency of AP mechanisms: Are these core market makers exploiting their informational and structural advantages? How should conflicts of interest between their proprietary trading and market-making duties be managed?

Furthermore, the incident highlights the market’s fragile confidence and tendency to seek simple narratives during downturns. After months of decline, the market desperately seeks a clear “enemy” to explain stagnation. Jane Street and the timing of the lawsuit serve this purpose perfectly. However, attributing complex market volatility to a single entity’s daily manipulation, while compelling for storytelling, may obscure more fundamental factors such as macro liquidity tightening, geopolitical risks, and on-chain structural weaknesses.

Possible Future Scenarios

Based on current information, the market and the event could evolve along several paths:

Scenario 1: Narrative Persists, Rebound Continues. If the lawsuit continues to develop without direct evidence disproving market manipulation claims, the current optimistic narrative of “pressure release” may dominate short-term sentiment. Coupled with a macro risk appetite recovery, Bitcoin could stabilize above $70,000 and attempt higher resistance levels. In this case, market focus would shift away from fundamentals, driven by emotion and storytelling, potentially creating a short squeeze.

Scenario 2: Sentiment Cools, Market Reverts to Structural Reality. Over time, traders may realize that the “10 a.m. sell-off” is an unverified myth. As the lawsuit news loses momentum, attention may return to weak on-chain data (such as realized profit/loss ratios, large holder changes) and macro uncertainties. Without fresh capital inflows, the rally could falter, leading to sideways movement or a retest of support levels around $62,500 or even $60,000.

Scenario 3: Regulatory Action and Industry Reforms. The lawsuit might prompt regulators to scrutinize market makers’ behaviors more closely. If investigations expand into their trading practices or lead to stricter disclosure requirements, the entire ETF ecosystem could face higher compliance costs. While this may initially pressure prices due to increased uncertainty, in the long run, clearer rules could promote healthier market development. The impact on prices would be complex: short-term volatility might rise, but long-term transparency would benefit the market.

Conclusion

The entanglement of the “10 a.m. Bitcoin crash theory” with Jane Street’s lawsuit is a recent chapter in the narrative-driven nature of crypto markets. The allegations of market manipulation and the structural features of ETFs are intertwined, with short-term price swings diverging from long-term on-chain trends. Currently, the only confirmed facts are the lawsuit itself and the coincidental price movements. Whether Jane Street is an innocent market facilitator or a sophisticated manipulator remains to be clarified by legal and regulatory authorities. For market participants, distinguishing facts from opinions and speculation—and analyzing underlying data and structures beyond the noise—may be a more reliable way to navigate this turbulent period.