Market Makers Retreat Amid US Crackdown
The crypto industry has suffered another major blow as two leading market makers, Jane Street and Jump Crypto, announced plans to scale back their crypto operations. The decision comes amid escalating regulatory scrutiny in the United States, dealing a further hit to an already fragile liquidity environment.
According to a Bloomberg report, both firms will continue limited crypto activity but at a much smaller scale than before. This retreat follows the collapse of Alameda Research and FTX in November, events that have already left significant gaps in the market’s liquidity structure.
A Thinner Market, Higher Volatility
The exit of Jane Street and Jump Crypto is expected to further erode liquidity, amplifying volatility across digital assets. Since the FTX collapse, crypto markets have struggled to maintain depth, with over $22 billion in stablecoin outflows recorded over five months.
Lower liquidity means smaller trades can move prices significantly, leading to sharper swings both upward and downward. Bitcoin, for instance, dropped roughly 7% over 36 hours, trading at around $26,200 by Friday morning.
Dan Ashmore, Head of Research at Invezz, noted that rising prices over the past six months have not been driven by positive developments but rather by broader correlations with stock markets and risk assets as interest rate expectations softened.
Regulatory Pressure Mounts
Jane Street and Jump Crypto’s decision underscores the growing challenges posed by US regulators. Since FTX’s collapse, agencies such as the SEC and CFTC have intensified their enforcement campaigns, creating uncertainty for firms operating in the digital asset space.
Jane Street, once the employer of Sam Bankman-Fried before he founded Alameda, was cited in the CFTC’s lawsuit against Binance for allegedly providing US market access despite restrictions. Jump Crypto, meanwhile, was deeply tied to the failed Terra ecosystem and faced investigations following its collapse.
This tightening regulatory environment has prompted leading companies like Coinbase to consider relocating parts of their operations abroad. CEO Brian Armstrong recently suggested that the United Arab Emirates could become an international hub as the US “turns the screw” on crypto innovation.
Divided Reactions to the Crackdown
Reactions to the regulatory clampdown remain polarized. Critics argue that excessive regulation will push innovation offshore, stifling US leadership in Web3 development. Others believe the industry is finally being held accountable after years of unchecked speculation and retail losses.
Regardless of perspective, it’s clear that the US is becoming an increasingly hostile environment for crypto firms — one that threatens to drive away liquidity, innovation, and talent.
What Lies Ahead for Crypto
As institutions retreat, the narrative of crypto’s integration with traditional finance appears to be reversing. The pandemic-era optimism that Wall Street would embrace digital assets has given way to a wave of exits, bankruptcies, and enforcement actions.
Crypto can survive beyond US borders, but losing access to the world’s largest capital market will slow its growth, limit innovation, and dampen investor confidence. With major liquidity providers stepping back, the volatility that has long defined crypto markets is likely to intensify.
The next phase for crypto may unfold offshore — and under far different conditions than the US ever intended.
