There's a bunch of suggestions where glow squids should drop glow ink. But I don't think we should farm the glow squids to extinction like regular squid farms. Instead, I think it would make the glow squids more unique if they squirt glow ink when the player gets too close. And then collect it using a bottle, like dragon's breath. Which you can then craft into glowing dyes.
The added difficulty balances the demand for glow ink (assuming that glow ink can be used for glowing signs, banners, underwater torches, etc.) and it doesn't make automation too easy. Also, glow squids should spawn in the underwater lakes, it would encourage players brave the caves and reward them with some cool glowing ink.
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