Alpaca Finance recently made headlines in the international crypto community, but not quite in the way one would imagine. On April 24, Binance revealed its intention to delist ALPACA tokens, an action generally expected to make the price of any token plummet. But Alpaca bucked the trend. Rather than a crash, its price skyrocketed aggressively, catching even experienced analysts by surprise. The unprecedented rally has left everyone guessing how ALPACA achieved such speed despite delisting.

Binance Delisting Notice Placed ALPACA into the Spotlight

Binance, the leading cryptocurrency exchange, on April 24 announced that it would be delisting four tokens, among them ALPACA, by May 2. Generally, announcements of delisting cause price to drop severely as a result of lower usability and loss of legitimacy. According to Binance, reasons cited for delisting were low transaction volumes, diminished developer support, and lower quality networks overall. Soon after, deposits and withdrawals in ALPACA were deactivated, and by May 2, all ALPACA trading pairs in the spot market would be eliminated.

However, this notwithstanding, the price of ALPACA experienced a sudden surge, garnering massive attention among the crypto space.

Short Squeeze, Funding Rate Adjustments, and Supply Shock Pushed the Price Higher

The sudden price increase of Alpaca Finance can be mostly explained by a strong short squeeze. Traders, anticipating the token to tank following the delisting announcement, opened large short positions. As the price began to rise, though, these short-sellers were forced to rapidly cover tokens to prevent losses, causing the price to accelerate further.

These reforms by Binance further amplified pressure. The absolute funding cap limit was increased to ±4% from ±2%, and the funding period from four hours was cut to a single hour. These reforms subject short positions to more financial burdens.

Simultaneously, ALPACA’s token supply was tightened. Token minting was halted, and approximately 35 million tokens—representing 18.6% of the max supply—were burned. The resulting supply shock, combined with increased demand, fueled the price rally.

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Market Manipulation or Momentum?

A few on-chain commentators and crypto analysts have hypothesized that this was an instance of whales-led market manipulation. Around $50 million worth of positions, out of which $43 million were shorts, got liquidated. This is being compared to the legendary 2021 GameStop short squeeze, when retail traders took on big institutional players.

Now, the focus is on whether this rally is maintainable. With ALPACA being de-listed from Binance, its long-term future is uncertain.