The "culprit" behind the cryptocurrency market crash has emerged, with top market maker Jump becoming the target of criticism?

Author: Jaleel Jia Liu, BlockBeats

Editor: Zhang Wen, BlockBeats

This is a historic day in 2024. The global financial markets have collapsed across the board, with Nvidia plummeting 14% in after-hours trading, and the stock markets in Japan and South Korea experiencing unprecedented losses. The crypto market is no exception, with Bitcoin's price briefly falling below $50,000, and Ethereum suffering a drop of over 25%, erasing all gains made this year.

The market is in shambles, with the liquidation volume on DeFi platforms skyrocketing to $320 million, setting a new annual record. This situation inevitably brings to mind the "carnage" of the crypto market on March 12, as market participants speculate on the reasons behind this crash. Aside from the conclusion of Japan's ¥20 trillion arbitrage, many voices and eyes in the crypto community are focused on the top market maker, Jump Trading.

Jump Has Almost Liquidated Everything

As an early crypto king who appeared before SBF, BitMEX co-founder Arthur Hayes posted on social media that he learned through traditional financial channels that a "big player" is liquidating crypto assets. Arthur Hayes stated that he does not know if this is true, "I won't name names, but if you've heard the same news, please let everyone know."

Although he did not specify names, the speculation within the community is quite clear, pointing directly at Jump Trading and its cryptocurrency division, Jump Crypto. Community users even joked that Jump has now been renamed "Dump," mocking its potential large-scale sell-off of crypto assets. Some even directly released a photo of former Jump Crypto CEO Kanav Kariya, implying that Jump is the reason for the market crash.

These speculations are not without basis. On-chain data analysis indeed reveals some signs.

According to data from EmberCN, Jump Trading has recently been gradually redeeming its holdings of $410 million worth of wstETH and converting it to ETH, which is then transferred to exchanges like Binance and OKX. From July 25 to now, Jump Trading has redeemed 83,000 wstETH, converting them into 97,500 ETH, of which 66,000 ETH (approximately $191 million) has already entered trading platforms.

As of the time of writing, Jump Trading's address still holds 37,600 wstETH and 11,500 STETH, which are in the unstaking process at Lido Finance.

According to Arkham, at the peak at the end of 2021, Jump's address held nearly $10 billion, but now this address has less than $600 million in assets. Of this $595 million position, a significant portion has shifted to stablecoins, with USDC and USDT accounting for 96% of the holdings.

This includes: USDC holdings worth $468 million; USDT holdings worth $103 million; ETH holdings worth $8.7 million; WBTC holdings worth $2.68 million; CVX holdings worth $1.95 million; W ETH holdings worth $1.56 million.

The Mysterious King of High-Frequency Trading

When talking about the top high-frequency trading firms, the name Jump Trading is unavoidable.

Founded in 1999 and headquartered in Chicago, Jump Trading is known for its high-frequency trading and complex algorithmic trading strategies, holding an important position in global financial markets. The company primarily engages in trading activities in traditional financial markets, including stocks, futures, and foreign exchange.

The two founders, Bill DiSomma and Paul Gurinas, both started as floor traders at CME (Chicago Mercantile Exchange) and met in 1992 when the financial markets began to shift towards electronic trading. They sensed that computers would have an absolute advantage in arbitrage trading. Thus, they founded Akamai Trading LLC in 1999, and later renamed the company to Jump in 2001, a name it still uses today.

As the absolute king of high-frequency trading, Jump Trading spares no expense to ensure its advantage in trading speed. From using fiber optics to microwave towers, to undersea cables and even satellite links, Jump Trading continually explores and adopts the latest technologies to optimize trading speed, further enhancing its high-performance computing and AI-driven trading systems through partnerships with top tech companies.

It is worth mentioning that since its inception, Jump has always operated very discreetly, remaining behind the scenes and quietly amassing wealth, earning the title of the world's most mysterious high-frequency giant. It is a company controlled by a small number of people, trading solely with its own funds, making it difficult for outsiders to understand its internal operations or financial status.

Moreover, Jump has a highly confidential policy, with the company and its executives rarely responding to any form of interview requests. All information about the company must be kept secret even by former employees.

It is said that the entire company is divided into more than 20 trading teams, each independently developing and running investment strategies while sharing the company's hardware facilities and technology platforms, without sharing any trading-related information between different teams.

It wasn't until a 2010 public document from the U.S. Securities and Exchange Commission that the public learned that Jump made a net profit of $268 million that year, with operating revenue of $512 million. According to another SEC document, the company's profits even reached $316 million in 2008.

From $80 to $8, Jump Still Bullish on Solana

By 2021, Jump's mysterious and low-key style seemed to begin to change, with a more open attitude towards public participation.

The partners in Jump's venture capital department began to become active in the public eye, openly publishing podcasts and blogs and recording videos to share their insights and experiences.

In 2021, Jump Trading established a dedicated retail wholesaler business unit to provide execution services for stock and cryptocurrency trading orders for individual investors. Through its partnership with Robinhood, Jump further solidified its position in the online brokerage space. According to SEC documents, Jump paid Robinhood an amount equivalent to 17% of the brokerage's total revenue, approximately $247 million, in just the first three quarters of 2021. This partnership not only brought significant profits to Jump but also significantly enhanced its influence in the retail market.

"Clearly, Jump has been a rather quiet company in the past, but as the market and our development progress, we will become more public-facing," said David Olsen, President and Chief Investment Officer of Jump.

Thus, the following year, Jump Crypto was born. Notably, at that time, the CEO of Jump Crypto was the 26-year-old Kanav Kariya from India, who had previously interned at Jump.

Kanav Kariya

At that time, Jump Crypto invested 40% of its seventh investment fund (totaling $350 million) into the cryptocurrency space, focusing on investments in DeFi, Web 3.0, blockchain, and financial applications.

Since its establishment, Jump Crypto has become an important player in market making and blockchain project investments, especially in the Solana ecosystem.

One of Jump Crypto's main contributions to Solana is the development of a new validator client called Firedancer. This project aims to enhance the throughput and network stability of the Solana blockchain, addressing previous frequent network interruptions and speed reductions, significantly improving the infrastructure and overall reliability of the Solana network.

Additionally, Jump Crypto has played a key role in the decentralized development of Solana. They not only helped solve technical challenges but also promoted the expansion of the Solana network through substantial funding and resource investments, enabling it to accommodate more users and complex decentralized applications (DApps). This has made Solana one of the most popular blockchains globally, with widespread applications in finance, NFTs, gaming, and more.

In 2022, even when Solana sharply dropped from $80 to below $8 in just a week, Dave Olsen, President and Chief Investment Officer of Jump Trading, publicly expressed his optimism about Solana. It is not an exaggeration to say that Jump is the "wave maker" of the Solana ecosystem.

In addition to Solana, according to the rootdata page, Jump has also invested in crypto projects such as Wormhole, Lido, AltLayer, Celestia, Aptos, and Injective, each of which is a top-tier project in the crypto space.

Legal Troubles, CEO Departure, Jump Becomes Quiet Again

However, Jump Crypto has not been smooth sailing; in Kanav Kariya's view, the years since he took office have been tumultuous.

The Wormhole cryptocurrency bridge supported by Jump was hacked in early 2022, resulting in losses exceeding $300 million, prompting Jump to cover the losses out of its own pocket.

Jump Crypto's trading and investment activities have drawn significant attention from U.S. regulators. In June of this year, Fortune reported that the Commodity Futures Trading Commission (CFTC) has launched an investigation into Jump Crypto. Although the specific reasons for the investigation have not been made public, this move is seen as part of the U.S. regulators' intensified crackdown on the entire crypto industry. The pressure from this investigation has also forced Jump Crypto to scale back some of its business activities in the U.S. market.

In addition to facing regulatory pressure, Jump Crypto has also been involved in several controversial incidents. First, the collapse of FTX caused significant financial losses for Jump Crypto. Additionally, Jump has come under scrutiny from regulators for its role in the collapse of the Terra USD stablecoin, with U.S. officials pointing out that Jump earned over $1 billion from the Terra/Luna project before its collapse.

Just days after news broke of the CFTC's investigation into Jump Crypto, the young CEO of Jump Crypto Kanav Kariya** announced his departure.** This young executive, who played a key role within the company, expressed his complex feelings about his journey at Jump and his outlook for the future through Twitter.

Seemingly nostalgic, or perhaps complaining, Kariya stated in a tweet: "Next, I will continue to stay in touch with the portfolio companies I was deeply involved with, while hoping to take some time to reflect and process the turmoil we experienced in the past few years."

Looking back at June 2022, during that time, the cryptocurrency market experienced severe fluctuations, especially the collapse of TerraUSD and Luna, which had a profound impact on the entire industry. The panic and crash in the market were far more severe than today. At that time, according to Bloomberg, Kanav Kariya confidently stated in a company meeting: "Jump Crypto is not exposed to risk, is not in a liquidity crisis, and is not laying off employees; we are still hiring."

However, Kariya's departure today seems to mark a significant turning point for Jump Crypto amidst the storm. Faced with sudden sell-offs and overwhelming external doubts, Jump Crypto chose silence and did not make a public response.

What is even more noteworthy is that aside from Jump Capital's Twitter and LinkedIn accounts still being updated, the social media accounts of Jump Trading, Jump Crypto, and Jump Crypto Engineering have not been updated since September 2021, September 2023, and May 2023, respectively.

It seems that the wheel of history has turned, bringing Jump, which had gradually opened up, back to the mysterious state it was in three years ago. Today, Jump has once again become "mysteriously quiet" and "hidden."