February 26, 2026, marked the strongest single-day rally in the crypto market in recent memory. According to Gate market data, Bitcoin (BTC) surged toward the $70,000 mark within 24 hours, ultimately closing at $68,193.8—a 4.27% gain for the day. Hot on its heels, Ethereum (ETH) and Solana (SOL) also posted impressive gains, rising 7.83% and 7.66%, respectively, with prices reaching $2,055.32 and $87.95. This collective surge not only ended a three-day losing streak for major assets but also added approximately $170 billion to the market’s total capitalization in a single day.
However, unlike previous rallies driven by macroeconomic policy shifts or technical breakthroughs, this surge had a rather unique catalyst—it stemmed from a lawsuit against quantitative trading giant Jane Street, which sparked widespread speculation about "artificially manipulated selling pressure."
Revisiting the "10 a.m. Sell-Off" Rumor: From the Terra Collapse to the Jane Street Lawsuit
The immediate trigger for this market volatility was an insider trading lawsuit filed by the bankruptcy administrator of Terraform Labs against Jane Street. The lawsuit alleges that Jane Street used non-public information obtained from insiders at Terraform Labs to front-run trades on the eve of the 2022 Terra ecosystem collapse, exacerbating market turmoil.
Following the announcement, a long-standing suspicion within the crypto community quickly gained traction: analysts and traders pointed out that, for several months, the market had exhibited a fixed pattern—every day around 10 a.m. Eastern Time, Bitcoin faced a concentrated wave of programmatic selling, putting downward pressure on prices. Some commentators dubbed this phenomenon the "10 a.m. sell-off." Remarkably, the day after the lawsuit news broke, this months-long pattern abruptly vanished, replaced by a sharp upward spike.
Data Decoded: $170 Billion Market Cap Rebound, $473 Million in Short Liquidations—How Strong Was the Rally?
Structurally, this narrative has some logic. The launch of spot Bitcoin ETFs has made traditional market makers (like Jane Street) critical players in the market. As an authorized participant and market maker for several Bitcoin ETFs, Jane Street holds significant positions, and its hedging and inventory management activities can directly impact short-term liquidity in the spot market.
Market data shows that before the rally, Bitcoin had just undergone a deep correction—after hitting an all-time high of around $126,080 last October, it retraced nearly 50% at its lowest point. The prolonged decline left market sentiment extremely fragile, with more than 45% of circulating supply in unrealized losses. In such an environment, any narrative suggesting the "removal of a major source of selling pressure" could trigger massive short covering and a wave of bargain hunters. Over the past 24 hours, total short liquidations across the market reached $473 million, accounting for 81% of all liquidations—a quantitative testament to the intensity of the rebound.
Market Divides: "End of the Market Maker Conspiracy" or "Narrative-Driven Frenzy"?
Market sentiment is now sharply polarized.
Viewpoint A (Rumor-Driven Camp): Represented by several crypto KOLs, this group believes Jane Street was the mastermind behind the "10 a.m. sell-off." By systematically selling at a fixed time to push prices down and liquidate leveraged retail traders—then buying back at lower levels—this strategy was repeated in cycles. The lawsuit forced this behavior to stop, removing systemic selling pressure and fueling a retaliatory rally.
Viewpoint B (Analytical Camp): More cautious voices, including Bloomberg Senior ETF Analyst Eric Balchunas, acknowledge that the "big villain is gone" narrative dominates the current market mood, but emphasize that this remains pure speculation for now.
Examining the "Conspiracy Theory": Where Is the Line Between Fact and Speculation?
It’s crucial to distinguish between facts and speculation in the current market narrative.
Facts:
- The bankruptcy administrator of Terraform Labs has filed an insider trading lawsuit against Jane Street, accusing it of using non-public information to exit positions ahead of the Terra collapse.
- Bitcoin’s price saw a significant rebound after the lawsuit news broke, coinciding with the widely discussed "10 a.m." time window.
- Jane Street is indeed a major liquidity provider in the crypto ETF market.
Speculation:
There is no public evidence that Jane Street operates an algorithm to "sell Bitcoin at 10 a.m. every day." While its trading activities may have objectively contributed to price pressure, there is a vast logical gap between "market impact" and "intentional manipulation." Bridging that gap would require concrete trading data and regulatory findings.
Crisis of Trust or Regulatory Opportunity? Rethinking the Role of Market Makers
Regardless of the lawsuit’s outcome, this event has already had a profound structural impact. It reveals that, beneath the ideal of "decentralization," the crypto market relies on centralized market makers far more than many realize. The trading actions of a single market maker—or even just rumors of a lawsuit against one—can move hundreds of billions in market value in a short time. This alone raises questions about the market’s maturity.
Looking ahead, this case will likely prompt the industry to reassess the role of market makers and the regulatory framework governing them. If Jane Street is ultimately found to have exploited information advantages for improper gain, it could spark a comprehensive compliance review of market-making business models—especially regarding information barriers and insider trading controls. This would directly affect market liquidity and trading costs.
Market Outlook: Continued Rally, Narrative Unraveling, or Regulatory Storm?
Based on current information, we can outline three potential scenarios:
Scenario 1: Continued Rally (Moderate Probability)
If Jane Street has proactively paused or adjusted its U.S. market-making strategies in response to the lawsuit, the market could indeed shed some short-term baggage. Should macro conditions (such as a weakening dollar index or a return of risk appetite) align, Bitcoin could consolidate above $70,000 and test the next resistance level.
Scenario 2: Pullback After Narrative Disproven (Higher Probability)
The current rally is built on an unverified assumption. If evidence emerges that the "10 a.m. sell-off" had nothing to do with Jane Street, or if market focus returns to macro headwinds like tightening policies or tariff disputes, the gains—lacking fundamental support—could quickly evaporate. Roughly 9 million BTC currently in an unrealized loss position represent significant overhead selling pressure.
Scenario 3: Regulatory Storm Escalates (Lower Probability, But Far-Reaching Impact)
In the most extreme scenario, U.S. regulators (such as the SEC or CFTC) intervene to investigate Jane Street, expanding the Terra lawsuit’s scope to its day-to-day market-making operations. This could trigger a crisis of confidence across the entire market-making sector, causing liquidity to dry up instantly and exposing the market to a potential second bottom.
Conclusion: Await the Truth, Stay Rational
This market rally, triggered by the Jane Street lawsuit, is essentially a concentrated release of long-suppressed sentiment, mixed with speculation and frustration over "artificial manipulation." Yet, the greatest pitfall in financial markets is mistaking narrative for truth. Without solid evidence, any trade based on rumors is like building castles on sand. While investors may enjoy the rebound’s rewards, they should remain wary of the risk of a reversal once the narrative is disproven. The long-term health of the market ultimately depends on transparent rules and genuine trust. In the coming days, as more lawsuit details emerge and market makers adjust their behavior, the true market direction will gradually become clear. Until then, staying rational and managing positions carefully may be the best strategy for navigating uncertainty.
