Jane Street Lawsuit Triggers Bitcoin Volatility: The Reality Behind the 10 a.m. Phenomenon and Market Perspectives

The final week of February 2026 saw extreme volatility in the Bitcoin (BTC) market. After weeks of sluggish declines, BTC staged a powerful rebound on February 26, briefly approaching the $70,000 mark. This surge coincided with a major development: on February 24, the bankruptcy administrator of Terraform Labs filed an insider trading lawsuit against global quantitative trading giant Jane Street in a New York federal court. Almost instantly, the long-circulating "10 a.m. Bitcoin crash theory" resurfaced as a hot topic in the crypto community. Many commentators painted Jane Street as the "mastermind" behind daily timed sell-offs, linking the lawsuit and the alleged cessation of these sales directly to the recent price rally. Drawing on Gate market data (as of February 26, 2026), this article aims to clarify the timeline and causal chain of these events, distinguish between objective facts, market opinions, and logical speculation, and explore the deeper structural impact on the industry.

The "Timed Sell-Off" Suspicion Rekindled by the Lawsuit

The immediate catalyst for this episode was the lawsuit filed by Terraform Labs’ bankruptcy administrator against Jane Street. According to the complaint, Jane Street is accused of using secret communication channels—established between its former intern and Terra insiders—during the May 2022 collapse of the Terra ecosystem to obtain non-public information, including the planned withdrawal of UST liquidity from Curve pools. Jane Street then allegedly used related addresses to withdraw approximately 85 million UST in under 10 minutes, not only profiting illegally but also accelerating UST’s depegging and the broader collapse of the Terra ecosystem.

Unexpectedly, this legal action brought another long-standing market rumor back into the spotlight—the "10 a.m. Bitcoin crash theory." This theory holds that, since 2024, Bitcoin has frequently experienced sharp, precisely timed drops around 10 a.m. Eastern Time (the opening of the US stock market), with Jane Street—due to its unique position in the ETF market and high-frequency trading capabilities—suspected as the executor of this "daily sell-off" pattern. Community observers noted that after news of the lawsuit broke on February 24, the so-called "10 a.m. dump" phenomenon "magically" disappeared, replaced by two consecutive days of strong Bitcoin rallies. For the first time in five weeks, the weekly candle turned green.

Data and Structure: On-Chain Divergence Amid Price Rebound

Market data confirms the intensity of this rebound. According to Gate market data, as of February 26, 2026, Bitcoin (BTC) was trading at $68,503.5, up 4.53% over 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 threshold.

However, a closer look at on-chain data reveals that underlying market structure has not shown optimism to match the price surge. Analysis indicates that the realized profit and loss ratio (90D-SMA)—a metric reflecting overall market profitability—remains below 1, signaling a loss-dominated regime. Historically, after this ratio drops below 1, the market typically requires several months to digest losses and rebuild liquidity foundations. Meanwhile, large holders with 1,000 to 10,000 BTC have been consistently reducing their positions, offloading nearly 90,000 BTC over the past 12 days—setting the stage for potential sell pressure in future rallies. This suggests that, despite the narrative-driven euphoria sparked by the "lawsuit–sell-off disappearance," there has yet to be a fundamental improvement in net capital inflows or holding structure.

Examining the Narrative: Facts, Opinions, and Speculation

Discussion around Jane Street displays a classic three-layer structure of "facts, opinions, and speculation," requiring careful discernment from market participants.

Fact Layer: Objectively verifiable events include: 1) On February 24, 2026, Terraform Labs’ bankruptcy administrator filed an insider trading lawsuit against Jane Street, alleging misconduct during the Terra collapse. 2) Following the public disclosure of the lawsuit, Bitcoin’s price rebounded sharply, adding approximately $120 billion in market capitalization. 3) Jane Street is an authorized participant (AP) for several spot Bitcoin ETFs, giving it a central role in the ETF creation and redemption process and access to arbitrage opportunities between primary and secondary markets.

Opinion Layer: The market is rife with subjective interpretations based on these facts. The most popular view is that Jane Street has long operated an algorithm that sells Bitcoin precisely at 10 a.m. each day to suppress prices and liquidate retail investors, then buys back at lower prices. The lawsuit’s exposure supposedly forced it to halt these activities, lifting ongoing sell pressure from the market. Bloomberg ETF analyst Eric Balchunas also noted the market’s perception linking the lawsuit to the disappearance of this "threat."

Speculation Layer: Building on these opinions, some deeper speculation attempts to explain the mechanisms by which Jane Street could manipulate prices. For example, some analysts point out that while Jane Street disclosed large holdings of IBIT shares in 13F filings, this may be just the "tip of the iceberg." The speculation is that Jane Street may be hedging through over-the-counter put options, short futures, and other derivatives to construct a net short position, allowing it to profit from Bitcoin price declines. As an authorized participant, Jane Street could exploit price discrepancies between spot and ETF shares—or even actively influence prices to align with its derivatives positions. However, these theories about complex hedging strategies and deliberate manipulation remain purely logical inferences, lacking any public regulatory evidence or trading data.

Market Structure Collides with Manipulation Allegations

Regardless of the lawsuit’s eventual outcome, this incident has already had a tangible impact on the industry. It has brought unprecedented public and regulatory attention to the microstructure of spot ETFs. Jane Street’s role as an authorized participant—originally designed to ensure ETF price alignment with net asset value as a liquidity provider—now finds itself at the heart of market manipulation suspicions. This has sparked industry debate over the transparency of the AP mechanism: Are these core market makers exploiting informational and structural advantages in gray areas? How should potential conflicts of interest between proprietary trading and market-making obligations be defined?

Additionally, the episode underscores the market’s hunger for compelling narratives during periods of fragile confidence. After months of declines, participants were eager to identify a simple, tangible "enemy" for the stagnant price action. Jane Street and the timing of its lawsuit fit this role perfectly. However, attributing complex market fluctuations to the daily actions of a single entity—while highly viral—risks obscuring more fundamental factors such as tightening macro liquidity, geopolitical risks, and persistent on-chain structural weakness.

Multi-Scenario Evolution Forecast

Based on the current information, the market’s future trajectory and the evolution of this incident could unfold in several scenarios:

Scenario 1: Narrative Momentum Drives Continued Rally. If the Jane Street lawsuit continues to gain traction and no direct evidence emerges to refute the manipulation allegations, the prevailing "removal of suppressive force" narrative may keep dominating short-term sentiment. Coupled with a rebound in macro risk appetite, Bitcoin could hold above $70,000 and attempt to break higher resistance levels. In this scenario, market focus would shift entirely away from fundamentals, fueling a short squeeze driven by sentiment and storytelling.

Scenario 2: Sentiment Cools, Market Returns to Structural Reality. Over time, the market may recognize that the "10 a.m. sell-off" is ultimately unprovable. As the lawsuit’s news cycle fades, traders’ attention will return to weak on-chain data (such as realized P&L ratios and whale holdings) and macro uncertainties. Without fresh capital inflows, the rally may lose steam, with prices consolidating within the current range or even retesting support at $62,500 or $60,000.

Scenario 3: Regulatory Response, Industry Rules Reshaped. This lawsuit could serve as a starting point for regulators to scrutinize market maker behavior. If investigations expand to include spot market trading patterns or prompt the SEC and others to tighten oversight and disclosure requirements for authorized participants, the operational costs and compliance barriers for the entire ETF market will rise. While this is a direct negative for market makers like Jane Street in the short term, more transparent rules would benefit the market’s long-term health. The price impact in this scenario would be complex and far-reaching—potentially pressured in the short run due to uncertainty, but ultimately positive for compliance and maturation.

Conclusion

The entanglement of the "10 a.m. Bitcoin crash theory" and the Jane Street lawsuit is a fresh example of how narratives drive the cryptocurrency market. In this case, allegations of market manipulation and the structural mechanics of ETFs have become intertwined, with short-term price swings diverging from long-term on-chain trends. At present, the only confirmed facts are the lawsuit itself and the coincidental price movement. Whether Jane Street is an innocent liquidity provider or a sophisticated manipulator remains to be determined by legal and regulatory authorities. For market participants, distinguishing facts, opinions, and speculation—and looking beyond the noise to examine the data and structure beneath the price—may be the most reliable way to navigate this wave of volatility.