Delisting but Rising Instead? Unveiling the Capital "Short Squeeze Script" Behind ALPACA

Author: Fairy, ChainCatcher

Editor: TB, ChainCatcher

"Delisting Bomb" turns into "Wealth Rocket"?

On April 24, Binance announced it would delist the ALPACA token. Normally, one would expect sell-offs, panic, and a crash for ALPACA. However, contrary to expectations, ALPACA has surged over 650% since the announcement.

Is this bizarre rebound a "flash in the pan" for the project, or a prelude laid by capital players? Behind this sudden frenzy, a storm may be brewing…

Image source: coingecko

Countdown to Delisting turns into "Short Squeeze" Moment

On April 10, Binance launched the second round of voting for delisting. A week later, the results were revealed, with ALPACA ranking seventh among 17 candidates, indicating the onset of a delisting crisis. On April 24, Binance officially announced it would delist ALPACA on May 2 and liquidate perpetual contracts on April 30. Following the news, ALPACA's price plummeted from $0.0329 to $0.029, with a market cap shrinking to $5 million.

Just as the market widely believed ALPACA would falter, a dramatic scene unfolded: the price surged from $0.029 to $0.0857 within an hour, a staggering increase of 195%. This sudden spike caught short sellers off guard and set the stage for even crazier movements ahead.

On April 25, Alpaca Finance officially stated that due to trading volume surpassing 1 billion tokens, market makers had requested to issue more tokens to maintain liquidity, but the plan was canceled after community opposition. This change undoubtedly dealt another blow to the bears.

Thus, on April 26, ALPACA's liquidation volume even surpassed Bitcoin, primarily driven by short liquidations. The entire market seemed to transform into a "precise harvesting battle" against short sellers.

Image source: Coinglass

"Short Squeeze Script"

Regarding ALPACA's rebound, He Yi stated that this might be investors buying the shell to quickly recoup their investments through short-term operations. Based on analyses from community users @LuBtc888, @0xooorange, and @Mumuyay, we have outlined a complete "short squeeze script":

1. Pre-positioning before delisting

Before the delisting announcement, "whales" may have been aware of or sensed abnormalities, with suspected accumulation actions around April 19. During this period, ALPACA's trading volume on Binance significantly increased, but the price rise was minimal.

2. Creating expectation misalignment, "bearish trap" emerges

The market generally expected "delisting = crash," leading retail investors and short-term speculators to collectively bet against it, resulting in a surge of short positions and a spike in open interest for ALPACA contracts. The "whales" took advantage of this to accumulate at low levels, building long positions significantly at the bottom, then driving up the spot price, triggering a chain reaction of short liquidations.

3. Rule changes accelerate the short squeeze rhythm

Binance shortened the funding rate collection period from 8 hours to 1 hour, causing ALPACA's funding rate to drop to -2%. Short sellers not only faced liquidation risks but also had to pay high "interest" every hour, forcing them to close positions quickly, which accelerated the short squeeze and increased the pace of price rises.

4. Main players' profit model

Spot market: Accumulate chips at low prices during the panic of delisting, create the illusion of a "flash in the pan," and attract retail investors to chase high prices before offloading at elevated levels.

Contract market: Hold large long positions and continuously collect interest paid by shorts through a negative funding rate mechanism, achieving profits in both directions.

Uncertainty in ALPACA's Future

Opinions on ALPACA's future trajectory are divided in the market. @Mumu_yay believes that the delisting announcement will trigger a liquidation mechanism, meaning both long and short positions will be automatically liquidated. In this case, the "whales" do not need to worry about finding exit liquidity; they can simply wait at high levels for the liquidation to trigger.

However, crypto KOL Kuang Ren holds a different view. He believes that from a game-theoretic perspective, the whales will choose to gradually build long positions at high points and then reverse to short, thereby crashing the spot market and ultimately maximizing profits through liquidation. Therefore, his conclusion is that ALPACA's trajectory will lead to a crash.

Additionally, trader @thankUcrypto pointed out that generally, there is a pump before delisting, which is often followed by a dump. As the platform with the strongest market liquidity, if Binance does not perform a dump operation before the delisting on May 2, market makers will have to wait until after the delisting to dump on other exchanges. However, the depth and buying power on other platforms are insufficient, meaning the profits from dumping will be significantly reduced.

The Storm is Not Over, Future is Uncertain

As the delisting date of May 2 approaches, ALPACA's fate remains undecided. Its rise and fall trajectory has become a typical microcosm of capital games in the crypto market. The market is always in cycles, and perhaps new "ALPACAs" will continue to emerge in the future, playing out similar scripts in different forms.

In the midst of turbulent waves, rationality remains the only reliable anchor for investors. In the face of short-term emotions and temptations, only by staying clear-headed and keeping one's eyes open can one avoid losing direction in the noise. Stay away from high-risk tokens lacking fundamental support, and be wary of the undercurrents of manipulation and control. In navigating the seas, only a prudent helmsman can steer clear of hidden reefs.