Bitcoin fans latch on to ‘ridiculous’ Jane Street conspiracy to explain price slump

It’s been a bad few months for Bitcoin, as prices have fallen over 40% since October. For investors this has been especially frustrating since, unlike in previous downturns, there has no obvious explanation for the market malaise. This week, however, the perpetually online crowd known as Crypto Twitter came up with a culprit: The secretive Wall Street firm Jane Street, which they alleged had been engaging in a surreptitious form of ETF-related trading that systemically depressed the market.

The theory spawned a series of viral posts in the fever swamps of social media, and gained further traction when Bitcoin staged a midweek rally—following further claims that Jane Street had changed its trading patterns after being “exposed.” The claims, however, appear to be flimsy at best in the eyes of Wall Street veterans. They were also dismissed by a person close to Jane Street, who was not authorized to speak for attribution but described the claims as an “absolutely ridiculous” conspiracy theory.

The unfounded claims that Jane Street manipulated the price of Bitcoin revolve around the firm’s role as an “authorized participant” in the relatively new market for crypto ETFs offered by BlackRock and others. So-called APs, which are an integral part of the ETF landscape, are deep-pocketed firms that help ensure that the price of ET...