Jane Street Lawsuit Controversy Escalates: Bitcoin Returns to $70,000, Is the "10-Point Sell-Off" Phenomenon Coming to an End?

February 25, 2026, the crypto market experienced its strongest single-day rebound in recent times. According to Gate data, Bitcoin (BTC) price briefly approached the $70,000 mark within the past 24 hours, closing at $68,193.8, a 4.27% increase over the period. Following closely, Ethereum (ETH) and Solana (SOL) also performed well, rising 7.83% and 7.66% respectively, with prices reaching $2,055.32 and $87.95. This collective surge not only ended the previous three-day decline of mainstream assets but also added approximately $170 billion to the total market capitalization in a single day.

However, unlike previous rallies driven by macro policies or technological breakthroughs, this round of market movement appears to be driven by a very unusual catalyst — a lawsuit against quant trading giant Jane Street, and the widespread speculation about “artificial manipulation of sell pressure” that followed.

Revisiting the “10 AM Sell-off” Rumor: From Terra Collapse to Jane Street Lawsuit

The immediate trigger for this market fluctuation was a lawsuit filed by Terraform Labs’ bankruptcy administrator against Jane Street, alleging insider trading. The lawsuit accuses Jane Street of using non-public information obtained from Terraform insiders to front-run trades before the 2022 Terra ecosystem collapse, thereby exacerbating market turmoil.

Shortly after the lawsuit was announced, a long-standing rumor within the crypto community quickly gained traction: analysts and traders pointed out a pattern observed over recent months — around 10 a.m. Eastern Time, Bitcoin would experience a concentrated algorithmic sell-off, putting downward pressure on prices. This phenomenon was colloquially called the “10 AM sell-off.” Remarkably, the pattern abruptly disappeared the day after the lawsuit was made public, replaced by a strong bullish candle.

Data Breakdown: $170 Billion Market Cap Rebound, $473 Million Short Liquidation, How Strong Is the Rebound?

Structurally, this narrative has some logical basis. The listing of spot Bitcoin ETFs has made traditional market makers (like Jane Street) crucial players in the market. As authorized participants and market makers for multiple Bitcoin ETFs, Jane Street holds significant positions, and its hedging and inventory management could influence short-term liquidity in the spot market.

Market data shows that before the rebound, Bitcoin experienced a deep correction. After reaching a peak of about $126,080 in October last year, it retraced nearly 50%. The prolonged decline left market sentiment extremely fragile, with over 45% of circulating supply in unrealized loss, making the market highly sensitive to any disturbance. In this context, a narrative that the “main source of selling pressure has been removed” could trigger a large-scale short squeeze and influx of bottom-fishing capital. Data indicates that in the past 24 hours, total net short liquidations reached $473 million, accounting for 81% of total liquidations, quantifying the intensity of the rebound.

Market Divergence: Is This “Market Maker Conspiracy Ending” or “Narrative Frenzy”?

Current market sentiment shows a sharp polarization.

View A (Rumor-driven): Many crypto KOLs believe Jane Street is behind the “10 AM sell-off.” They argue that by systematically selling at a fixed time, they suppress prices, liquidate leveraged retail traders, and then buy back at lower levels — a cycle that repeats. The exposure of the lawsuit is seen as having halted this behavior, removing systemic selling pressure and enabling a revenge rally.

View B (Cautious analysis): Analysts like Bloomberg ETF expert Eric Balchunas acknowledge that “the big villain has disappeared,” which is the prevailing “mood” now, but emphasize that this remains speculation at this stage.

Examining the “Conspiracy Theory”: Where Do Facts End and Speculation Begin?

It’s important to distinguish facts from speculation in current market information.

Facts:

• Terraform’s liquidation administrator has filed an insider trading lawsuit against Jane Street, accusing it of using non-public information to exit positions before Terra’s collapse.
• Bitcoin’s price has rebounded significantly following the lawsuit announcement, coinciding with the previously discussed “10 AM” window.
• Jane Street is indeed a major liquidity provider in the crypto ETF market.

Speculation:

• There is no public evidence that Jane Street operates a “daily 10 AM algorithmic sell-off of Bitcoin.” While its trading activity may have objectively exerted downward pressure, the leap from “market impact” to “subjective manipulation” involves a huge logical gap, requiring concrete trading data and regulatory evidence to substantiate.

Trust Crisis or Regulatory Opportunity? Rethinking the Role of Market Makers

Regardless of the lawsuit’s final outcome, this event has already caused profound structural implications. It reveals that under the ideal of “decentralization,” the crypto market’s reliance on centralized market makers is far greater than expected. A single market maker’s trading behavior, or even rumors of a lawsuit against it, can swing hundreds of billions in market cap in a short time — a serious test of market maturity.

In the long run, this case will prompt the industry to reevaluate the role and regulation of market makers. If Jane Street is proven to have exploited informational advantages for improper gains, it could trigger comprehensive compliance reviews of market maker practices, especially regarding information barriers and insider trading prevention. This would directly impact market liquidity provision and trading costs.

Future Scenarios: Continued Rebound, Narrative Disproof, or Regulatory Storm?

Based on current information, three possible paths can be envisioned:

Scenario 1: Continued Rebound (Moderate probability)

If Jane Street, in response to the lawsuit, voluntarily suspends or adjusts its US trading strategies, the market might indeed shed some of its burdens in the short term. If macro factors (e.g., dollar index weakening, risk sentiment improving) align, Bitcoin could stabilize above $70,000 and test higher resistance levels.

Scenario 2: Correction after Narrative Disproof (Higher probability)

The current rally is based on an unverified hypothesis. If subsequent evidence shows that the “10 AM sell-off” was unrelated to Jane Street, or if market focus shifts back to macro tightening, tariffs, and other bearish factors, the rally could quickly unwind. With about 9 million BTC in unrealized loss above, there is significant overhead selling pressure.

Scenario 3: Escalating Regulatory Storm (Lower probability but impactful)

The most extreme scenario involves US regulators (SEC or CFTC) investigating Jane Street and expanding the Terra lawsuit probe into its market-making activities. This could trigger a trust crisis in the market, leading to liquidity drying up and a potential double bottom.

Conclusion: Awaiting the Truth, Maintaining Rationality

The recent market rebound triggered by the Jane Street lawsuit is essentially a release of long-suppressed sentiment, mixed with speculation and dissatisfaction over “artificial manipulation.” However, the worst mistake in financial markets is to equate narrative with truth. Without concrete evidence, any rumor-driven trading is like building sandcastles on the beach. Investors should enjoy the rebound but remain cautious of a “narrative disproof” correction. Long-term market health ultimately depends on transparent rules and genuine trust. In the coming days, as more details of the lawsuit and market maker behavior emerge, the true market direction will become clearer. Until then, maintaining rationality and controlling positions may be the best strategy to navigate uncertainty.