$FRAX and similar tokens have a dark underlying logic—simply put, they are designed by major players through a funding fee mechanism to carefully harvest retail investors.

How does the harvesting work? The core trick isn't complicated. When the on-chain spot price is artificially driven up far above the contract price, the funding rate begins to tilt towards long positions. Short sellers have to continuously pay fees to longs, while the big players have already accumulated a large number of long positions at low levels—creating a perfect arbitrage loop.

The operators' tactics are quite routine. First, they select tokens with very small circulating supply on-chain, making them easy to manipulate and with acceptable transaction costs. Then, they quietly accumulate large long positions in the futures market, hidden from view. Next, by manipulating the spot price to surge dramatically, they trigger a spike in the funding rate. Retail investors see the high funding fees, become envious, and follow the trend to open longs—thinking they can profit from the fees—only to become the high-level bagholders. The big players' costs are fixed at low levels; once the timing is right, a sudden short squeeze hits, retail longs are liquidated instantly, and everyone leaves empty-handed.

What about the short sellers? They are gradually drained during the continuous funding fee payments. Their principal evaporates through repeated fee deductions, ultimately forcing them to cut losses and sell.

It's not hard to identify these fee-driven tokens. Just look for three features: first, usually only futures trading exists, with no spot trading; second, on-chain liquidity is virtually nonexistent, while futures trading volume can be ten times or more the on-chain volume; third, and most crucial, on-chain wallet addresses are extremely concentrated, with the tokens held tightly by a few entities. When these features appear, it's a clear warning sign.