The crypto market has never been short of surprises – and Alpaca Finance (ALPACA) is the most vivid proof of this in the past week. In an event likened to a 'reverse shock', this token surged over 2,500%, bringing the trading price to around $1.40 – a level not seen since late 2021 – before adjusting down. Notably, this explosive increase occurred right after the Binance exchange announced it would delist ALPACA, something that seemed likely to hit its value hard.
ALPACA 1-day price chart | Source: TradingView
From the delist shock to the dramatic price increase
On May 2, Binance will officially stop supporting all trading services related to ALPACA. This information initially caused panic, leading to a double-digit price drop due to concerns over liquidity, transparency, and the project's future.
However, what happened next left many people astonished: ALPACA not only did not 'die prematurely', but soared like a 'wild horse escaping the stable'. According to many analyses on platform X, one phenomenon can explain this: Short squeeze.
Right after the delist news was announced, many traders bet on a price drop scenario – by opening Short positions. And as predicted, the price dropped... but not for long. When the buying force suddenly poured in, the price began to recover strongly, forcing those who were 'Short' to buy back ALPACA to cut losses, creating a chain reaction that pushed the price up quickly – a 'buy pressure - price increase - buy pressure again' loop characteristic of a Short squeeze.
Alongside short-term moves, Alpaca Finance is still maintaining a regular token burn program, creating fundamental support for the price. The project reported that it has conducted 214 buybacks and burns, removing nearly 35 million ALPACA from circulation – equivalent to 18.6% of the total maximum supply. According to economic theory, a decrease in supply while demand remains constant or increases will push prices up, which somewhat explains ALPACA's remarkable recovery.
While ALPACA's surge has excited many, some technical signals suggest that the enthusiasm may not last long. The RSI index – a measure of the strength and speed of price changes – has surged to 82.26, far exceeding the 'overbought' threshold (70). This signals a high likelihood of correction or pullback in the short term.
Lessons from ALPACA's comeback
The story of ALPACA is a clear reminder that the crypto market does not follow traditional rules – and sometimes, crowd psychology and technical factors like Short squeeze can turn the tide in just a few hours.
However, risks are always present. For investors considering 'buying the peak' of ALPACA, special attention should be paid to the liquidity decline after being delisted on Binance and the potential for a strong pullback if buying demand suddenly decreases.
Always remember that in the crypto world, where everything can change in just one tweet or a decision from a major exchange, high expectations always need to be accompanied by a solid risk management strategy.
Disclaimer: This article is for informational purposes only and is not investment advice. Investors should thoroughly research before making decisions. We are not responsible for your investment decisions.