A Major Market Maker Exposed: Jane Street, Terra and the 10am Bitcoin Pattern

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)

Source:https://www.tradingview.com/x/xvO5Go7e/

A relatively flat session for PAXG, moving just 0.3% from the open. The structure remains bullish and price continues to trend towards its all time high.

BTC/USD Key Levels and Price Action:

Source:https://www.tradingview.com/x/1lktB01W/

Bitcoin has rallied 8% from the recent low of $62.5k and now trades just shy of $70k. The rebound followed increased attention around the Jane Street allegations, with bulls reclaiming short term momentum.

Price now faces key resistance at $70k, a level that has rejected upside attempts multiple times over recent weeks. A sustained breakout and daily close above $70k would open the door for a move towards $80k.

However, $70k remains a significant barrier. Bulls currently hold the short term advantage, but follow through is required.

BTC Total ETF Flows for 25 Feb: (data not availabale at the time of writing)

(ETF flow data is sourced from https://farside.co.uk/btc/ and reflects figures at the time of writing.)

To receive the Morning Note in your inbox, subscribe here: https://stormrake.substack.com/

*All prices are denominated in USD unless stated otherwise*

Written by Alexandar Artis and James Ryan

Create a brokerage account today

No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

Stormrake is not a financial adviser and does not provide financial product advice. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances. Stormrake is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by this newsletter.

Disclaimer

All statements made in this newsletter are made in good faith and we believe they are accurate and reliable. Stormrake does not give any warranty as to the accuracy, reliability or completeness of information that is contained here, except insofar as any liability under statute cannot be excluded. Stormrake, its directors, employees and their representatives do not accept any liability for any error or omission in this newsletter or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided in this newsletter is owned by Stormrake. You may not alter or modify this information in any way, including the removal of this copyright notice.