Is Jane Street the Reason Bitcoin Isn't at $150K? An Expert Clarifies the Misconception

The notion that Jane Street is the sole reason Bitcoin isn't priced at $150,000 is misguided, according to Jeff Park, Chief Investment Officer at ProCap and advisor at Bitwise. In a recent discussion on X, he emphasized that it's not about one company, but rather a fundamental aspect of the US spot Bitcoin ETF system that allows authorized participants to hedge and settle trades in very adaptable ways.

Key Takeaways

The belief that Jane Street is solely responsible for Bitcoin's price is incorrect.
The issue lies within the structural characteristics of the US spot Bitcoin ETF system.
Authorized participants (APs) in the market, including major firms, have unique rights that complicate the price dynamics of Bitcoin.
There are significant differences in how APs operate compared to regular short sellers, influencing the trading landscape.
Experts have differing opinions on the implications of these structures on Bitcoin pricing.

Is Jane Street Suppressing Bitcoin?

Jeff Park argues that the conversation about Jane Street has become a distraction from understanding the underlying mechanics of the Bitcoin ETF market. He pointed out that the roster of authorized participants includes major firms such as JPMorgan, Goldman Sachs, and Citadel Securities, implying that their influence extends beyond any single company like Jane Street.

Park emphasized, “It’s essential to recognize that this issue isn’t only about Jane Street. It concerns a structural feature of the Bitcoin ETF framework that is relevant to every authorized participant in the market.” He noted that the role of these institutions is often misunderstood, even by seasoned professionals in finance.

The focus of Park's argument centers on the AP exemption under Regulation SHO. Unlike standard short selling, where traders must locate shares before shorting and face borrowing costs, authorized participants can manufacture ETF shares more freely without the same constraints.

“The significant practical outcome is that authorized participants can create shares at their discretion—there are no borrow costs, no capital is held against shorts, and there are no strict deadlines for closing positions,” he explained. “This flexibility resembles a regulatory carve-out intended for orderly ETF market-making but can effectively serve as regulatory arbitrage.”

This distinction is crucial because Park does not claim that authorized participants can indefinitely lower Bitcoin’s price. Instead, his argument is more nuanced. If an authorized participant is shorting the ETF and opts to hedge with Bitcoin futures instead of purchasing the actual Bitcoin, it diminishes the typical arbitrage pressure that would normally compel spot purchases. As a result, demand for spot Bitcoin can wane, influencing its price trajectory.

He articulated, “The key takeaway is: if the hedge involves futures rather than spot Bitcoin, the actual Bitcoin was never acquired. The natural arbitrage mechanism weakens because the natural buyer did not choose to purchase the spot.”

Additionally, he noted that recent changes allowing in-kind creations and redemptions have removed another layer that previously nudged activities toward the spot market. Under the earlier cash-only method, authorized participants had to deliver cash to purchase Bitcoin, creating inherent demand for spot buying. But the new in-kind system permits authorized participants to source Bitcoin from various counterparties, adding a layer of flexibility that could lessen market interaction.

Despite his analysis, Park refrained from claiming that authorized participants intentionally suppress Bitcoin prices. He clarified, “No authorized participant actively holds down Bitcoin's price. However, the structure can disrupt the price discovery process. These are not the same but the latter could be even more significant.”

Consensus Among Experts

Experts are weighing in on this discussion, with Eric Balchunas, a Senior ETF Analyst at Bloomberg Intelligence, stating, “The fear factor is dissipating... That’s the current sentiment in crypto communities and in today's price movements. The large sell-off around 10 AM seemed to halt every rally. But will this change lead to a lasting rebound? Only time will tell.”

However, some experts challenge Park's view. Keone Hon, founder of Monad, expressed skepticism about the theory, arguing that a hedge in Bitcoin futures presupposes another entity is also short on futures, maintaining the market's equilibrium. Similarly, Dave Weisberger asserted that the claims don't hold over the longer term, pointing out that futures ultimately align with spot prices upon expiry.

Park did not contest the math but questioned the practical implications of how long any trades can exist within the regulatory allowances. He elaborated, “I don't believe in the conspiracy theory that suggests authorized participants suppress prices. Rather, if there is a theory, it would be that without the cost of carry, bizarre situations might arise.”

Leading on-chain analyst James "Checkmate" Check supported Park’s view by stating, “Jane Street didn’t suppress the Bitcoin price. It was the HODLers. The situation is straightforward; rather than blaming manipulators, recognize that a lot of Bitcoin was sold.”

As of now, Bitcoin is trading at $67,883.

Bitcoin price chart