To receive the Morning Note in your inbox, subscribe here: https://stormrake.substack.com/
It is no secret that market makers and liquidity providers influence price action within financial markets to generate profit, often at the expense of retail traders. Whilst much of this discussion usually sits in the realm of speculation, there are moments where allegations move beyond rumour. We saw questions raised around Wintermute previously, and now attention has turned towards Jane Street.
Over the last few months we briefly covered the consistent weakness in Bitcoin during the first hour of the US trading session. It became a noticeable pattern. Bitcoin would trade relatively constructive during the Asian session, only for price to reverse shortly after the US market opened. By the time most of us woke up, gains had been erased and downside continuation followed.
The pattern was simple. Around 10am EST there would often be sharp selling pressure.
At first this was dismissed as coincidence. However, a recent lawsuit involving Jane Street has added weight to those suspicions. The firm is now reportedly facing legal claims that could exceed $1 billion across multiple filings, including allegations tied to the Terra collapse and broader market conduct.
Jane Street and the Luna Collapse:
To understand the gravity of the situation, we need to revisit the Terra Luna collapse of 2022. During the bear market, one of the largest crypto ecosystems imploded after its algorithmic stablecoin, UST, lost its peg to the dollar. Over $40 billion in market value was wiped out in a matter of days.
Legal complaints now allege that a former Terraform Labs intern leaked non public information to Jane Street. Specifically, it is claimed that Jane Street became aware of internal liquidity movements before they were executed on chain.
On May 7, 2022, Terraform withdrew $150 million in UST liquidity from a Curve pool. Roughly ten minutes later, a wallet allegedly linked to Jane Street withdrew $85 million. Critics argue that this accelerated instability in the pool and contributed to the depeg that followed.
These allegations remain unproven in court. However, Terra related claims alone are reportedly seeking damages in excess of $800 million. Combined with other market manipulation accusations, total exposure could move beyond the $1 billion mark if courts rule against the firm.
Jane Street and the 10am Bitcoin Pattern:
Separate from the Terra case, analysts have highlighted a recurring pattern in Bitcoin price action around the US equity market open.
For months, Bitcoin would trade with relative strength during the Asian and European session, only to reverse sharply once US markets began trading. These moves frequently triggered long liquidations before price stabilised later in the day.
The allegation is straightforward. Aggressive selling at the open forces liquidations, pushes price into liquidity clusters, and creates lower re entry opportunities. The incentive would be to create short term volatility, trigger forced selling, and accumulate Bitcoin exposure at discounted prices while benefiting from positions held via ETFs and proxy equities such as Strategy.
Jane Street operates as an authorised participant in major Bitcoin ETFs, giving it significant access to liquidity and execution at scale. Filings also show meaningful exposure to Strategy, a company that functions as a leveraged Bitcoin proxy due to its large BTC treasury.
Critics argue that repeated selling pressure at a structurally important time of day, combined with large ETF and proxy exposure, raises questions about market fairness.
Why this Doesn’t Represent Bitcoins True Value:
We know why Bitcoin was created. It was not designed to be just another traded product that can be exploited for institutional profit at the expense of retail participants.
Bitcoin’s long term success is not driven purely by speculation. It is rooted in its utility, scarcity, decentralised nature, and monetary properties. Price appreciation over time has been a byproduct of adoption and conviction, not simply a ‘number go up’ narrative.
Manipulation exists in every financial market. We saw it in silver for over a decade through sustained price suppression, and it persists in traditional equities today. It should not surprise anyone that it appears in Bitcoin. But these distortions are temporary. Over the long term, fundamentals reassert themselves.
Stormrake Spotlight: Pax Gold (PAXG) ($5,180)
Stormrake Spotlight: Pax Gold (PAXG) ($5,180)
