Recently, opportunities for short squeezes in altcoins have frequently appeared. I successfully captured the $VOXEL market trend by writing a monitoring program using AI. This article will analyze the strategy logic and prompt writing techniques, teaching you step by step how to create your own monitoring bot.
The current cryptocurrency market is showing a risk-averse trend influenced by macro policies, with liquidity in risk assets continuously shrinking. Large holders of altcoins are facing liquidity dilemmas: the spot market is under heavy selling pressure, how to achieve chip turnover? The perpetual contract market is becoming a new battleground for liquidity creation by large holders!
1. Short Squeeze Strategy Operation Mechanism#
How do large holders complete chip turnover through perpetual contracts? The complete logical deduction is as follows:
1. Dilemma of Large Holders#
- Huge spot positions
- Direct selling triggers price collapse
- Insufficient market depth makes it difficult to offload
2. Breaking the Dilemma with Perpetual Contracts#
- Utilizing forced buying during short stop-loss/liquidation
- Creating liquidity outlets through the contract market
3. Short Induction Strategy#
- Raising spot prices affects the mark price
- Attracting retail investors to establish short positions
4. Rate Arbitrage#
- Short positions push up negative funding rates
- Large holders profit from holding long positions
5. Perfect Exit#
- Pushing up to key resistance/liquidation zones
- Short covering provides liquidity
- Large holders complete chip turnover
- Can reverse to short for a second harvest
The essence of this strategy is to utilize the forced liquidation mechanism of the contract market, converting shorts into liquidity providers.
2. Core Monitoring Indicator System#
A complete short squeeze market presents the following data characteristics:
Extreme negative funding rate → OI abnormal growth → Breakthrough resistance level → Long-short ratio decline → Indicators return to normal
Specific monitoring dimensions are as follows:
1. Funding Rate Anomalies#
- Negative value breaks the -0.1% threshold
- Indicates high control by large holders
- Signals excessive concentration of retail short positions
2. Surge in Open Interest (OI)#
- OI short-term increase exceeds 100%
- Large holders accumulate short chips
- 3-period moving average/10-period moving average > 2
3. Price Breakthrough Behavior#
- Breaking through key resistance zones
- Triggering forced liquidation of shorts
- Forming a liquidity release window
4. Indicators Returning to Normal#
- OI begins to decline
- Funding rates approach normal values
- Long-short ratio rebounds
- Indicates the market is entering its final phase
Changes in funding rates and open interest are the core early warning indicators!
3. AI Monitoring Bot Setup Guide#
Achieve automated monitoring through Python + Telegram Bot, key implementation steps:
1. Data Collection Module#
Call the Binance perpetual contract API to obtain:
- Mark price (mark_price)
- Index price (index_price)
- Basis data (basis)
- Funding rate (last_funding_rate)
- Open interest (oi)
- Long-short account ratio (long_short_account_ratio)
- Top trader position long-short 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 Solution#
- 5-minute interval data scraping
- Store by trading pair to data/{symbol}.csv
- Historical data for trend analysis
3. Intelligent Alert System#
Set composite trigger conditions:
- Absolute value of funding rate > 0.1%
- 3-period OI average/10-period OI average > 2
- Breaking through the upper Bollinger Band (20,2)
- Meeting conditions triggers Telegram push notifications
Once deployed, the bot will capture short squeeze signals in real-time. It is recommended to set dynamic take-profit and stop-loss in conjunction with technical analysis to seize certain opportunities amidst market fluctuations!
Original @AI Soros Kote
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Further Reading#
2025 Top Ten Exchanges in China Authority Ranking
Real Wealth Stories in the Crypto World: From Millions to Debt Journey
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