Shanzhai Coin Short Squeeze Operation Strategy: Using AI to Develop a Shanzhai Coin Anomaly Signal Tracking Robot

Recently, opportunities for short squeezes in altcoins have frequently emerged. I successfully captured the $VOXEL market through an AI-built monitoring system. This article will decode the logic of the short squeeze strategy and share how to create an automated monitoring bot using Prompts.

Currently, the cryptocurrency market is exhibiting a risk-averse trend influenced by macro policies, with liquidity tightening for risk assets. Whales holding large amounts of altcoins are facing liquidity dilemmas: how to liquidate in the spot market? The perpetual contract market has become a key breakthrough! This is indeed a great opportunity for us to dance with the whales.

1. Mechanism of the Short Squeeze Strategy#

How do whales exit through the perpetual contract market? The complete logical deduction is as follows:

1. Whale's Dilemma#

Holding a massive amount of spot chips, but direct selling will trigger a price collapse.

2. Breaking the Deadlock with Perpetual Contracts#

Using forced buying behavior during short stop-loss/liquidation to create a liquidity outlet for whales.

3. Inducing Short Positions#

Raising spot prices to influence the mark price, inducing retail investors to establish short positions in perpetual contracts.

4. Rate Arbitrage#

Accumulation of short positions leads to contract prices trading at a discount, with negative funding rates becoming an additional source of profit for whales.

5. Ultimate Harvest#

Pushing prices to key resistance levels or liquidation zones, forcing shorts to cover their positions, allowing whales to distribute and even short-sell in reverse.
The essence of the strategy is to create a liquidity window by utilizing the passive absorption of shorts.

The essence of the strategy is to create a liquidity window by utilizing the passive absorption of shorts.

2. Key Monitoring Indicator System#

The complete short squeeze process presents the following data characteristics:
Extreme negative funding rate (control signal) -> OI abnormal growth (position building signal) -> Breakthrough resistance level (activation signal) -> Long-short ratio decline (harvest signal) -> Indicator regression (end signal)

To accurately capture market trends, it is essential to monitor the following indicators closely:

1. Extreme Negative Funding Rate (Funding Rate)#

When the funding rate is <-0.1%, it indicates that whales have a high level of control and that shorts are overly crowded, signaling potential short squeeze opportunities.

2. OI Anomalies (OI)#

A short-term surge in OI (3-period average/10-period average > 2) reflects large-scale position building by whales absorbing short chips.

3. Breakthrough of Key Levels#

A price breakthrough of resistance levels will trigger forced liquidation of shorts, forming a positive feedback loop.

4. Indicator Mean Reversion#

Recovery of the long-short ratio, decline in OI, normalization of the funding rate, marking the end of the short squeeze trend.

The abnormal resonance between funding rates and OI is a core indicator for early warning!

3. AI Monitoring Bot Construction Guide#

Say goodbye to manual monitoring and create an automated monitoring system using Python + AI to achieve real-time alerts on Telegram. The specific implementation path is as follows:

1. Data Collection Module#

Obtain key data for perpetual contracts from the Binance API:

Mark price (mark_price)
Index price (index_price)
Basis and percentage (basis/basis_percent)
Funding rate (last_funding_rate)
Open interest (oi)
Long-short account ratio (long_short_account_ratio)
Top trader long-short ratio (top_trader_account_ls_ratio)
Top trader position ratio (top_trader_position_ls_ratio)
Taker buy-sell ratio (taker_buy_sell_ratio)
(API documentation: https://developers.binance.com/docs/derivatives)

2. Data Storage Module#

Set to collect data every 5 minutes
Store by trading pair in data/{symbol}.csv

3. Alert Trigger Module#

Customize alert conditions:
When the absolute value of the funding rate > 0.1% and the short-term increase in OI > 100%, trigger a Telegram push.

Using the above Prompt, you can build a short squeeze monitoring system. It is recommended to set take-profit and stop-loss levels in conjunction with technical analysis. Market opportunities continue to emerge; deploy your digital sentinel now!

Original @AI Soros Kote

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