Shanzhai Coin Short Squeeze Strategy: Use AI to Build a Shanzhai Coin Anomaly Signal Tracking Robot

Recently, opportunities for short squeezes in altcoins have been frequent. I successfully captured the $VOXEL market using an AI-written monitoring program. 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 for risk assets. Holders of large amounts of altcoins face 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 makes direct selling impossible.

2. Breaking the Perpetual Contract#

Creating liquidity through forced buying behavior during short stop-loss/liquidation.

3. Short Inducement Strategy#

Raising spot prices (affecting the mark price) to attract retail investors to short the perpetual contracts.

4. Negative Funding Rate Arbitrage#

Accumulation of shorts leads to contract prices trading at a discount, 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 during short liquidations to create exit liquidity for the holders.

The essence of this strategy is to utilize the forced buying behavior during 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 (building positions) → Breaking resistance (triggering liquidation) → Long-short ratio declines (retail stop-loss) → OI falls back (distribution completed).

Capturing short squeeze signals requires key monitoring of:

1. Extreme Negative Funding Rate (<-0.1%)#

A deeply discounted funding rate indicates strong control by the holders, with excessive short positions.

2. OI Exponential Growth#

When the increase in open interest over three days exceeds 200% of the 10-day average, it indicates that the holders have completed their positions.

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 + normalization of rates, marking the end of the short squeeze.
Abnormal fluctuations in funding rates and open interest are core leading indicators!

III. AI Monitoring Implementation Plan#

Creating an automated monitoring system using Python + Telegram Bot, with core implementation steps:

1. Data Acquisition#

Calling 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% & 3-day OI average / 10-day OI average > 2, trigger Telegram push notifications.

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

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