CoinMarketCap price spike because of Tether (USDT)?

Earlier today, around 11am EST on the 3rd August 2018, prices of many cryptocurrencies on CoinMarketCap shot up as much as 14% over a 10 minute period. This caused a lot of confusion around if this was market manipulation or if some big news had been released. We go through what seems to have caused this below.

We've shared this on Reddit here, feel free to share your thoughts on the situation here!

CoinMarketCap vs other websites

When a coin's price goes up significantly on one website, it's generally a good idea to compare against several other websites to see if they also display this price increase. In this scenario when comparing 3 popular websites for listing coins, CoinMarketCap was the only one with very high prices:

If news, such as a recent post related to Microsoft, or manipulation were the cause, we'd expect all of these websites to have similar price increases. Given these other two websites didn't, it seems that something must have gone wrong on CoinMarketCap.

Tether (USDT) price increased to $1.08

When investigating Bitcoin's price, we noticed that multiple USDT pairs against Bitcoin looked to be higher than USD pairs. Here's a screenshot we took.

CoinMarketCap has a system where if a coin's price or volume is suspiciously high or low, they classify it as an 'outlier' and ignore it. In this scenario it seems that because Bitcoin's price went up on many exchanges for USDT, the data was classified as valid, causing Bitcoin's price to be affected by this data.

When looking at Tether's price on CoinMarketCap we then noticed that it had increased from its normal $1 (where it's supposed to be pegged to this value, and only vary by a fraction of a percent) up to $1.08. This is far more than it's intended behaviour, and far higher than sites like CoinGecko and CryptoCompare were displaying. See a screenshot of some USDT markets at the time here.

Short-term fix

In the short-term, CoinMarketCap seem to have posted a tweet that they're aware of the situation, and they've removed all trading pairs for USDT, so prices seem to have returned to normal.

We'll update this post as we get more information.

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