Jane Street: “The Trigger” for the Terra Collapse or Just the New Sacrificial Lamb of Crypto?

In the crypto market, every major crash needs a “villain.” In 2022, after the Terraform Labs disaster, the community blamed “whales,” faulty stablecoin design, and a Ponzi scheme in disguise. By 2026, another name unexpectedly got caught in the storm: Jane Street.

Is this a deliberate market manipulation—or just a story blown out of proportion amid a suspicious market environment? What Really Happened to Terra in 2022? In May 2022, the stablecoin TerraUSD (UST) lost its peg to $1. When UST lost its peg: Investors panic sold Liquidity evaporated The burn-mint mechanism between UST and LUNA entered a “death spiral” Within a few days: UST completely collapsed LUNA nearly dropped to zero About $40 billion in market cap was wiped out The domino effect spread across the market, contributing to a prolonged crypto winter and subsequent chain of bankruptcies—including the collapse of FTX and the prison sentence for Sam Bankman-Fried (a former employee of Jane Street). Lawsuit Targeting Jane Street: What Does It Say? Terraform Labs’ asset liquidation manager filed a lawsuit against Jane Street, accusing them of insider trading.

According to the lawsuit: Jane Street may have known in advance that Terraform was quietly withdrawing liquidity from key pools. This information was allegedly not public at the time. Immediately after liquidity was withdrawn, a wallet believed to be linked to Jane Street sold a large amount of UST within minutes. This heavy selling could have triggered the initial peg slip. If these allegations are proven, it could be one of the largest insider trading cases in crypto history. However, Jane Street denies the accusations. Jane Street – The Silent Power of Wall Street

Currently, Jane Street: Handles over 10% of all stock trading in North America Generates trading revenue exceeding that of the world’s largest hedge funds Operates as a quantitative trading firm Because they are not a traditional hedge fund, Jane Street is not required to disclose detailed trading strategies like many other organizations. This makes them a “black box” to the public. In the crypto environment, which is highly sensitive to transparency, the presence of a massive but secretive trading organization raises suspicions. The “Dump Bitcoin at New York Open” Story Besides the lawsuit, the community of traders also spreads another theory: Jane Street frequently “sells off” Bitcoin right after the New York market opens. In reality, many traders observe that Bitcoin prices tend to weaken after the US market opens. However: ETF flows Hedging activities Automated trading algorithms Portfolio rebalancing by organizations can largely explain these fluctuations. So far, there is no concrete evidence proving systematic market manipulation.

A Bigger Issue: Transparency and Market Power Regardless of the lawsuit’s outcome, this event raises important questions: What information do large market-making organizations have access to before the public? Is DeFi truly “decentralized” when liquidity heavily depends on traditional institutions? How will regulators respond if insider trading in crypto is proven? If the court finds misconduct, it could become a legal milestone reshaping the relationship between traditional finance and the blockchain ecosystem. If not, Jane Street might just be the latest “scapegoat” for a crash that was already structurally risky from the start. Conclusion Currently, all that exists are: Allegations from the plaintiff Denials from Jane Street And many community speculations Crypto always operates on the edge of innovation and chaos. This case is not just about Terra or Jane Street—it’s a major test of transparency, accountability, and real power in a market promoted as “decentralized.” Ultimately, the truth will be decided in court. And the market? It’s still watching.