Jane Street's $85M UST Withdrawal and the 10 AM Myth: Flow Analysis

The core event triggering the lawsuit was a specific, high-stakes liquidity withdrawal. A wallet linked to Jane Street withdrew 85 million TerraUSD from Curve3pool minutes after Terraform Labs quietly pulled a massive $150 million liquidity withdrawal from the same pool. This sequence accelerated the stablecoin's loss of its dollar peg, directly fueling the $40 billion market wipeout that followed.

The lawsuit's purpose is to recover funds for creditors who lost billions. The bankruptcy administrator alleges Jane Street used non-public information from Terraform insiders to front-run these trades, essentially profiting from the ecosystem's death spiral before the public knew about the liquidity drain. The estate seeks damages from Jane Street's co-founder and other employees.

This specific UST withdrawal flow is separate from the viral 10 AM sell-off theory. That narrative, which gained traction after the lawsuit, suggests Jane Street systematically dumped Bitcoin every morning at 10 a.m. to manipulate prices. While the timing of the lawsuit coincided with a sharp crypto rally, there is no public evidence supporting the existence of this daily pattern. The UST withdrawal is a documented, single-event allegation of insider trading, not a recurring market manipulation theory.

The $2.5B IBIT/MSTR Trading Pattern

The alleged 10 a.m. Bitcoin dump is a narrative, but the underlying trading pattern is a documented flow. Jane Street has been systematically unloading Bitcoin at U.S. market opens while aggressively accumulating MicroStrategy (MSTR) shares. This dual strategy, revealed in its latest 13-F filing, shows a 473% boost in MSTR shares to a $121 million position, contrasting sharply with other major funds that have been selling the stock.

The mechanism for this flow is the authorized participant (AP) role in spot Bitcoin ETFs like BlackRock's IBIT. As a primary market maker, Jane Street can create or redeem ETF shares by exchanging baskets of underlying assets. The firm's $2.5B+ position in IBIT is the scale that could enable such a pattern. By selling Bitcoin into the market at the open, it depresses the spot price, which can then be used to buy the ETF at a discount during the creation process.

The critical nuance is that Jane Street's massive IBIT holdings mask its true Bitcoin exposure. As crypto influencer Justin Bechler noted, a $790 million IBIT holding could be hedged with short futures or options, making the firm's net Bitcoin position invisible in public filings. This legal structure allows the firm to profit from the price discrepancy between spot and ETF, turning a daily market open into a predictable liquidity sweep.

The 10 AM Dump Data vs. Reality

The viral narrative of a daily 10 a.m. Bitcoin dump is unsupported by the actual flow data. Since January 1, Bitcoin's cumulative return in the 10:00-10:30 ET window is 0.9%, a positive move that contradicts the claim of systematic selling. This pattern closely mirrors the performance of the Nasdaq Index, indicating broader risk-asset repricing rather than targeted manipulation by a single firm.

The mechanism behind the alleged pattern is more nuanced than simple selling. Jane Street's massive $2.5B+ position in IBIT allows it to act as an authorized participant, creating or redeeming ETF shares. This role involves buying spot Bitcoin and selling futures to hedge, a delta-neutral strategy common among institutional funds. The resulting trades can create localized price pressure at the open, but they are not a consistent, algorithmic dump.

The post-lawsuit anecdote-that 10 a.m. volatility has vanished-is not evidence of a structural change. The lawsuit's filing coincided with a sharp market rally, fueling speculation that a source of selling pressure had been removed. However, the absence of a daily dump is anecdotal, not data-driven. The firm's legal structure and hedging strategies remain intact, and the market's reaction is more likely a relief rally than proof of a discontinued manipulation pattern.