Recently, opportunities for short squeezes in altcoins have been frequent. I successfully captured the $VOXEL market trend by writing a monitoring program using AI. This article will analyze the strategy logic and share how to create a monitoring bot using Prompts.
The current cryptocurrency market is affected by uncertainties in macro tariff policies, leading to increased risk aversion and tightening liquidity in risk assets. Holders of large amounts of altcoins are facing a dual dilemma: how to sell in the spot market, and how to fill the liquidity gap? The perpetual contract market is becoming a new battlefield for these holders to exit!
I. Strategy Logic Deduction#
How do holders exit through perpetual contracts? The complete logical chain is as follows:
1. Holder's Dilemma#
Holding a large amount of spot chips, but liquidity exhaustion prevents direct selling.
2. Breaking the Perpetual Contract#
Creating liquidity through forced buying behavior during short stop-loss/liquidation.
3. Short Induction Strategy#
Raising the spot price (affecting the mark price) to attract retail investors to short perpetual contracts.
4. Negative Funding Rate Arbitrage#
Short accumulation leads to contract price discounts, harvesting shorts through negative funding rates.
5. Ultimate Harvest#
Pushing up to resistance levels triggers short liquidations, taking the opportunity to distribute chips.
The essence of this strategy is to utilize the forced buying behavior of short liquidations to create exit liquidity for the holders.
The essence of this strategy is to utilize the forced buying behavior of short liquidations to create exit liquidity for the holders.
II. Core Monitoring Indicators#
The complete short squeeze process presents the following data evolution:
Extreme negative funding rate (spot control) → OI surges (position building) → Breakthrough resistance (trigger liquidation) → Long-short ratio decreases (retail stop-loss) → OI falls back (distribution complete).
To capture short squeeze signals, focus on monitoring:
1. Extreme Negative Funding Rate (<-0.1%)#
A deeply discounted funding rate indicates strong control by the holders and excessive short crowding.
2. OI Exponential Growth#
When the three-day increase in open interest exceeds 200% of the ten-day average, it indicates that the holders have completed their position building.
3. Key Resistance Breakthrough#
Price breaks through important moving averages like EMA30/EMA120, triggering strong short liquidations.
4. Data Mean Reversion#
Long-short ratio rebounds + OI declines + funding rate normalizes, marking the end of the short squeeze.
Abnormal fluctuations in funding rates and open interest are core leading indicators!
III. AI Monitoring Implementation Plan#
Create an automated monitoring system using Python + Telegram Bot, with the core implementation steps:
1. Data Acquisition#
Call the Binance perpetual contract API to obtain key parameters:
- Mark price / Index price
- Basis and basis rate
- Funding rate
- Open interest (OI)
- Long-short account ratio
- Large holder position ratio
- Taker buy-sell ratio
(API documentation: https://developers.binance.com/docs/derivatives)
2. Data Storage#
- Collect data for all USDT contract trading pairs every 5 minutes.
- Store in CSV files in the data directory by symbol.
3. Alert Triggering#
Custom condition combinations:
When the absolute value of the funding rate > 0.1% & the three-day OI average / ten-day OI average > 2, trigger a Telegram push.
After deploying this monitoring system, it is recommended to set dynamic take-profit and stop-loss levels in conjunction with technical analysis. Market opportunities continue to exist; deploy your AI trading sentinel immediately!
Original @AI Soros Kote
OKX Activities This Month#
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🔥 Essential Tools for On-Chain Surfing#
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Further Reading#
2025 Top Ten Exchanges in China Authority Ranking 🔥
【Real Experience】From Millions in Assets to Millions in Debt: Insights from the Crypto World
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