Let's talk about TRB, a recent favorite for the past two years. To be honest, it’s a textbook example of the funding rate play, and also a classic case that has wiped out countless big players.

It surged over 100 times in just over six months—how did this multiplier come about? Simply put—short squeeze. Through the mechanism design of funding rates, the main players gradually forced the shorts out.

At that time, TRB’s short army was roughly divided into three parts. The first wave consisted of large traders trapped during the ascent from $10 to $100. Interestingly, there was almost no long participation during this phase. Why? Because a major platform nearby experienced a flash crash during the early stage of the coin’s launch (around $30). Only this coin dropped below the threshold, causing all leveraged long positions at low levels to be liquidated. Later, this short squeeze soared to a high of 720, but nobody can fully explain the trading logic behind the exchange’s moves.

The second wave involved arbitrage traders—they opened longs on top-tier exchanges and shorts on another exchange to hedge. The key point is that at that time, the funding rate for this coin was consistently negative 2%. Later, the leading exchange changed its funding cycle from 8 hours to 4 hours, but some other exchanges still kept it at 8 hours. This created an opportunity for arbitrageurs: splitting the same position into two hedged trades, earning a stable net profit of 3% per day. Sounds risk-free, right? Because it’s a two-way hedge. However, in reality, users on the top exchanges basically didn’t lose money because most positions were long.

The third wave was people going for high-position naked shorts at the top—these can’t really be evaluated.

Where does the capital for the whales come from? Relying on collecting funding rates. They hold long positions at super bottom prices, use the daily funding to control the funding rate level, then reverse the market to push the price up.

So what’s the key now? A well-known trader’s short position has become a consensus target—the market is collectively betting on a short squeeze against him. Can his bot strategy really hold?

Take a certain MEME coin as an example. Without VC selling pressure, almost all the chips are held by whales. The current funding rate is -0.03% per hour. This trader opened a short at an average of $0.20, but with the current price of $0.34, he’s already lost $1.1 million. That means he shorted 7.85 million tokens. Don’t forget, funding fees are calculated based on the current price, not the opening price.

When the price was at $0.20, the position was about $1.5 million, costing $450 per hour, or about $28,800 per day. Now at $0.34, the position is worth $2.66 million, costing $800 per hour, nearly $20,000 per day. If the price doubles again and the fee rate stays the same, the daily cost would be $40,000. He needs to continually add margin to cover these costs.

The strategy of the market makers is simple—maintain the funding rate level, and periodically push the market with a few waves.