
The crypto market staged a sharp rebound rally after news of Terraform Labs’ bankruptcy estate filed a lawsuit against Jane Street.
Author: Sahil Thakur
High attention and emotional sentiment detected.
26th Feb 2026 – The crypto market staged a sharp rebound after news broke that Terraform Labs’ bankruptcy estate filed a lawsuit against Jane Street.
Within 24 to 48 hours of the complaint becoming public (Feb 24–25), total crypto market capitalization jumped from roughly $2.18–$2.21 trillion to as high as $2.36–$2.5 trillion. That represents an increase of approximately $150–170 billion.
The move came after weeks of downward pressure, heavy fear sentiment, and a broader correction that had left Bitcoin nearly 47% below its October 2025 peak.
High Signal Summary For A Quick Glance
The House Of Crypto
@Peter_thoc
GREEN DAY FOR CRYPTO worth noting the strength of the rally from well established alts.. Many of them were close to macro lows, BTC continued lower over past 4 years but notable many alts failed to push lower... I personally still expect a bit more chop around here... but https://t.co/pNu7vqACDI

01:32 AM·Feb 26, 2026
Crypto Tony
@CryptoTony__
Since Jane Street got sued. Let me get this straight : Tweets deleted No 10 AM manipulation Bitcoin is up 10% ETH is up 15% Altcoins are up 25% $500 million in shorts liquidated Crypto market added $200 billion BULLISH
09:00 PM·Feb 25, 2026
borovik
@3orovik
The manipulation on crypto is over The bull market is finally starting https://t.co/uBpysBmdPo

08:15 PM·Feb 25, 2026
The 83-page complaint, filed in the Southern District of New York (Case No. 1:26-cv-1504), was brought by Todd R. Snyder, the court-appointed administrator overseeing Terraform Labs’ bankruptcy wind-down.
The suit accuses Jane Street Group LLC and specific traders of insider trading and front-running during the May 2022 TerraUSD (UST) collapse.
According to the filing:
The complaint claims that a former Terraform intern who later joined Jane Street shared material non-public information via a private chat group. That alleged leak, according to the estate, allowed Jane Street to unwind exposure at precisely the right moment, accelerating UST’s depeg and the eventual $40 billion ecosystem collapse.
The suit seeks damages, disgorgement of profits, interest, and a jury trial.
Jane Street has rejected the allegations, calling the lawsuit a “desperate” attempt to extract money and arguing that Terra’s collapse stemmed from internal fraud by Do Kwon and Terraform management.
Importantly, the complaint focuses on 2022 Terra events and does not accuse Jane Street of manipulating Bitcoin in 2026.
Almost immediately after the lawsuit gained attention, the broader crypto market rallied.

Community estimates suggest Bitcoin alone added more than $100 billion in market capitalization during the move.
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Short liquidations reportedly exceeded $500 million across the market, fueling the rally.
A major part of the market reaction was psychological.
For months, crypto traders had complained about a recurring “10 AM ET dump” pattern — sharp Bitcoin selloffs coinciding with the U.S. stock market open.
Jane Street, as a major ETF authorized participant and institutional market maker, was frequently rumored to be behind aggressive hedging or arbitrage flows during that window.
After the lawsuit became public:
On X, traders widely claimed that Jane Street had paused aggressive activity due to legal scrutiny. Posts circulated suggesting the “script flipped” the moment the lawsuit hit.
However, this link remains speculative.
There is no verified evidence that:
It is entirely possible that:
Markets often rally when uncertainty shifts, even without structural change.
Still, the timing was powerful. After weeks of bearish momentum, the lawsuit provided a clear headline around which traders could coordinate a reversal.
Three forces likely combined:
When traders perceive that a dominant seller may be sidelined, whether true or not, they reposition quickly. That perception alone can drive billions in flows.
In this case, the result was a $150B+ surge in total crypto market capitalization in under two days.
The Terraform estate’s lawsuit against Jane Street triggered one of the strongest relief rallies of 2026 so far.
Bitcoin reclaimed key levels. Ethereum broke back above $2,000. Altcoins followed. Short liquidations accelerated the move.
Whether the rally stems from legal consequences, structural market shifts, or simply a narrative reset remains unclear.
For now, the market has flipped from fear to momentum. The next question is whether follow-through buying sustains the breakout or whether this was simply a powerful short squeeze fueled by timing and psychology.
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