Cryptocurrency Market Makers in 2026: How Jane Street and Others Influence the Market

The hashtag "Fuck Jane Street" trended repeatedly on X in 2026, with retail anger directed at a core accusation — that this Wall Street quantitative giant deliberately "dumps" Bitcoin at the opening of U.S. stock markets each day. The latest 13F filings show Jane Street cut its Bitcoin spot ETF holdings by 70% in Q1 2026, while increasing its Ethereum ETF holdings by about $82 million. This sparked a wave of controversy. Is Jane Street manipulating the market, or is it being scapegoated? This article avoids emotional venting and breaks down the real mechanics of market making, along with the structural factors behind the "10 a.m. dump."

What Exactly Do Market Makers Do?

Many people confuse market makers with "market manipulators," but they are fundamentally different. Manipulators profit by driving prices up or down, while market makers profit from the bid-ask spread.

The core job of a market maker is to simultaneously place buy and sell orders on the order book, continuously providing two-sided quotes. For example, placing a buy order at $65,000 for Bitcoin and a sell order at $65,010, earning the $10 spread when a user trades. The profit per trade is tiny, but multiplied by millions of trades, the returns are substantial.

Additionally, exchanges often rebate a portion of trading fees to makers, and market makers, with their massive volumes, capture these rebates. They do not bet on direction; they aim for "Delta neutrality" — profiting from trading volume regardless of price movements.

What Is Jane Street Accused Of?

Founded in 2000, Jane Street has no CEO, no traditional hierarchy, and trades its own capital across over 200 global exchanges using mathematical models. In Q1 2026, it reported trading revenue of $16.1 billion and net profit of $10.3 billion, with an average employee compensation of $2.68 million — nearly seven times that of Goldman Sachs.

Its special position in crypto markets comes from two roles. First, it is a key Authorized Participant (AP) for Bitcoin spot ETFs like BlackRock's IBIT and Fidelity's FBTC — institutions with the right to directly create or redeem ETF shares with the fund. Second, it is the primary market maker for these ETFs, quoting prices at both the wholesale and retail levels.

The "10 a.m. dump" accusation stems from a pattern observed since 2025: Bitcoin prices often experienced regular declines about an hour after U.S. stock market opens. Critics allege that Jane Street uses its AP privileges to establish short positions in derivatives markets, then suppresses spot prices through ETF redemption mechanisms, effectively "harvesting from both sides."

Overlooked Structural Factors

Several industry insiders have publicly dissected this narrative, pointing out key counterarguments.

The redemption mechanism itself creates selling pressure. When there are large redemptions of IBIT, the AP must sell Bitcoin in the spot market to close the position. This is not "deliberate dumping" but a mechanical outcome of the market-making process. If selling pressure is concentrated at the market open, it is likely simply because institutional trading orders are executed at that time.

Inflows and outflows of basis arbitrage funds amplify volatility. CME Bitcoin futures often trade at a premium to spot prices, so quantitative firms short CME futures and go long on spot (via ETFs like IBIT) to capture the basis yield. In 2025, the annualized arbitrage yield reached 12-15%, attracting large arbitrage funds and inflating IBIT holdings. When yields fell below 5%, these funds unwound their positions, naturally leading to ETF redemptions and spot selling. Large subscriptions do not necessarily signal bullishness, nor do large redemptions signal bearishness — often, it's just a function of arbitrage yields.

Liquidity droughts make normal behavior appear abnormal. The extreme market conditions on October 11, 2025, triggered about $19 billion in liquidations, forcing many market makers to shrink their risk exposure and drastically reducing market liquidity. The same market-making hedging operations are nearly invisible in deep liquidity but become amplified into "manipulation" when liquidity is scarce.

There is also a counterintuitive point: if someone truly wanted to manipulate the market, why choose the most liquid period of the U.S. stock market open? Manipulation costs are much lower during illiquid times (e.g., after hours or weekends). Choosing the most liquid time of day to "dump" is inconsistent with the logic of manipulation.

What the Latest Data Signals

Q1 2026 13F filings show Jane Street reduced its IBIT holdings from approximately 20.31 million shares (about $790 million) to roughly 5.87 million shares (about $225 million), and cut FBTC by 60%. At the same time, it increased its Ethereum ETF exposure by about $82 million.

This data is interpreted by two camps. One side sees it as Jane Street "exiting Bitcoin pressure." The other side points out that 13F filings only disclose long positions at quarter-end, not short positions in derivatives, options, or swaps. These holdings were likely fully hedged through futures and options, so reducing ETF positions does not necessarily mean a bearish view on Bitcoin — it may simply be a portfolio adjustment after arbitrage opportunities narrowed.

The Market Making Industry Is Changing

The controversy around Jane Street is just the tip of the iceberg. The entire crypto market-making industry is undergoing profound changes. As the market turned bearish, budgets from projects for market makers have shrunk significantly. Quality projects are scarce while market makers have multiplied, squeezing profit margins. Compliance costs now account for 30-50% of total operating expenses, accelerating the淘汰 of the wild west era practices.

Leading market makers like GSR, Wintermute, and Keyrock are transitioning from pure "liquidity providers" to "Web3 investment banks" or "capital market platforms" — integrating token design, fundraising, listing, market making, and asset management into a full chain. Their edge no longer lies in information asymmetry and volatility, but in compliance capabilities and systematic risk management.

What This Means for Ordinary Traders

First, don't treat market makers as enemies. Without market makers providing two-sided quotes, market slippage would be much larger, and you might not find a counterparty when you want to sell. October 11, 2025, is the best counterexample — when multiple market makers paused their operations, the liquidity vacuum accelerated the crash.

Second, when you see a "regular dump," first think about structural causes before jumping to conspiracy theories. The ETF creation/redemption mechanism, inflows and outflows of basis arbitrage funds, and market makers' Delta hedging — all these can produce regular price patterns. Not every pattern has a villain behind it.

Third, understanding market makers' behavioral logic helps in assessing market phases. When arbitrage yields are high enough, large funds flow in through ETFs, pushing prices up; when yields narrow, fund outflows create selling pressure. This perspective is closer to the market's real functioning than simply being bullish or bearish.