It's not a problem with any particular "villain," but rather that every AP (Agent Processing) has the ability to influence BTC liquidity through the creation and redemption mechanism. Article by Eddie Xin, source: Tyler. "They were fcking us the whole time." This profanity, circulating on Reddit and Crypto Twitter after the lawsuit, along with an epic short squeeze involving over $240 billion in liquidations, directed market anger towards a single target: Jane Street Capital. At 10 AM, the liquidity trough in Asian markets over the past few months, the US Department of Justice's indictment finally revealed the tip of the iceberg. It all stemmed from Jane Street Capital, a top Wall Street market maker founded in 2000, which is accused of orchestrating a months-long "smokescreen" by using ETF arbitrage in the spot and derivatives markets, exploiting the creation and redemption mechanism of spot ETFs. A lawsuit brought this controversy to the public eye, and discussions surrounding ETF arbitrage mechanisms and price discovery structures quickly intensified, leading to a sharp market rebound and an epic short squeeze with over $240 billion in liquidations. But was Jane Street truly the culprit who pressed the suppression button? This is a question worth at least $1 billion. I. Did Jane Street really suppress the price of BTC? This question deserves a precise answer. The most important point to understand is that this is not just a question about Jane Street. It's a question about the structural characteristics of the Bitcoin ETF architecture, which equally applies to every Authorized Participant (AP) in the ecosystem. For BlackRock's IBIT alone, this list includes Jane Street Capital, JPMorgan Chase, Macquarie, Virtu Americas, Goldman Sachs, Citadel Securities, Citigroup, UBS, and ABN AMRO. The roles of these institutions have indeed been deeply misunderstood, even among experienced industry veterans, and this misunderstanding deserves to be corrected before any conclusions are drawn. Regarding Accessories (APs), the first thing to understand is that they occupy a marginal exception within the regulatory framework of Reg SHO (the SEC's rules governing naked short selling). For example, Reg SHO requires short sellers to borrow securities (position the stock) before shorting, but APs are exempt due to their contractual rights to participate in subscriptions and redemptions.While this may sound procedural, the practical consequences are significant. It means any AP can create shares at will—no borrowing costs, no capital tied up in short selling in the traditional sense, and no hard deadline for closing positions beyond a commercially reasonable timeframe. This is the gray area: a regulatory exemption designed for orderly ETF market making, structurally indistinguishable from regulatory arbitrage with unparalleled duration. This exemption isn't exclusive to any one firm. It's a prerequisite for becoming a member of the AP club. II. What does this AP exemption mean? Normally, if IBIT trades below its net asset value (NAV), you'd expect arbitrage buyers to intervene, redeem Bitcoin with shares, and smooth the difference. But any AP is itself that arbitrage buyer; they control the pipeline, meaning their motivation to smooth the difference is different from a third-party trading desk without redemption rights. This sounds complex, but a simple analogy simplifies it: First layer: What is normal "smoothing the difference"? Imagine a blind box (like the IBIT ETF) on the market. Everyone knows it contains a $100 voucher for real Bitcoin (representing the Net Asset Value, NAV). However, due to market panic, the blind box's price has plummeted to $95. Logically, savvy traders (arbitrageurs) would frantically buy the blind box at $95, then open it with the official channels to exchange it for $100 worth of Bitcoin, making a $5 profit. Because everyone is rushing to buy the blind box for arbitrage, the price quickly rises back to $100. This is called "smoothing out the price difference." The second layer involves the "monopolistic channel" of investment banks (APs). In the real world of Bitcoin ETFs, ordinary trading firms and retail investors are not qualified to "open the blind box" with the official channels (meaning they lack redemption rights). Only a few privileged Wall Street investment banks (APs) can do this. In other words, APs monopolize the sole channel for exchanging ETFs for real Bitcoin (they control the pipeline). Third layer: Why don't APs play by the rules? If it were an ordinary third-party trader, seeing this risk-free price difference of 5 yuan, they would definitely act immediately. But APs are different; they do a more shrewd calculation: "Since only I can open the blind boxes anyway, why should I rush? If I deliberately don't push the price back to 100 yuan, but instead use the illusion of the current low price of 95 yuan to short or long in another casino (such as the Bitcoin futures market), I might be able to make 20 yuan!"In short, the market originally had an automatic correction mechanism (when prices fell too much, arbitrageurs would buy in to push prices up). However, because the "sole switch" for executing this correction mechanism was in the hands of APs, and APs discovered that "not correcting and maintaining the price difference" allowed them to make more money elsewhere, they had no incentive to pull prices back to normal levels. Retail investors were desperately waiting for the arbitrage army to save prices, unaware that the sole arbitrage army (APs) was profiting from this price difference in other markets. Third, the problem wasn't with J.J. Street, but with AP's architecture. In principle, IBIT's short-selling exposure could be hedged by going long on Bitcoin spot, but this wasn't mandatory, as long as the chosen instruments remained closely correlated. An obvious alternative was BTC futures, especially considering their capital efficiency. This essentially meant that if the hedging instrument was futures instead of spot, then the spot was never bought, and because natural arbitrage buyers chose not to buy spot, this price difference couldn't be closed by the natural arbitrage mechanism. It's worth noting that the spot/futures basis is a central theme for the entire basis trading community, who strive to maintain this close relationship. However, every separation between the hedging instrument and the underlying asset introduces dirty basis risk, which accumulates throughout the structure—and under stress, this basis risk is precisely where market misalignment occurs. The final piece of the puzzle involves the SEC's recently approved in-kind creation and redemption. Under the previous cash-only regime, APs were required to deliver cash to the fund, which the custodian then used to purchase spot Bitcoin. This purchase acted as a structural regulator—as a mechanical consequence of the creation, it forced the buying of spot Bitcoin. In-kind creation and redemption completely eliminates this. Now, any AP can directly deliver Bitcoin, choosing the source and counterparty: OTC desks, negotiated pricing, and minimizing market impact. The broadest interpretation of this flexibility is that APs can maintain derivatives positions to profit from funding rates or volatility during the window between the establishment of a short position and the completion of physical delivery—while ensuring that each individual step still conforms to the definition of legitimate AP activity. And this is precisely the crux of the problem: it begins and ends as normal market-making, precisely because the intermediate process is difficult to clearly categorize. This is not an accusation against any single company.Every Action Board (AP) on the IBIT list, and by extension every AP in every Bitcoin ETF, operates within the same structural framework, enjoys the same exemptions, and therefore possesses the same theoretical capabilities. Whether any of them exercise this capability in a way that skirts the edge of coordinated activity falls entirely within the scope of the "monitoring-sharing agreements" required by the SEC when approving ETFs. Whether these agreements are sufficient to capture behavior across spot, futures, and ETF markets (even across offshore exchanges) remains a truly unresolved question. In short, Simple Street has simply been thrust into the spotlight; the real issue lies deep within the underlying architecture of Bitcoin ETFs, designed by Wall Street veterans. No single AP is explicitly suppressing Bitcoin prices; what the AP structure can suppress is the integrity of the price discovery mechanism itself, which may have a far more profound impact than the former. Therefore, the real question is not whether a particular company is the villain, but whether a regulatory framework built for 20th-century traditional finance is suitable for hosting a 21st-century emerging asset whose "value lies in being uncontrolled by regulators." This may be the tuition fee that the crypto market has to pay as it enters the "era of large institutions." After all, while we crave the liquidity from Wall Street, we don't want to passively accept the black-box games they create using regulatory exemptions. This is not only the answer for Jane Street, but also the ultimate question about the era of Bitcoin ETFs.