The Salvadoran government has decided to prevent users of its Chivo digital wallet from playing the app’s price freeze feature to glean risk-free profits through arbitrage.

On October 19, Chivo’s Twitter account announcement that wallet users will not be able to see the reference price provided for trades executed using the price freeze feature, which allows traders to hold the Bitcoin (BTC) price shown by the app for one minute maximum.

Chivo tweeted that opportunistic traders use the price freeze feature to scalp arbitrage on other cryptocurrency trading platforms around the world during times of high price volatility for Bitcoin. The price freeze feature gave traders the ability to take advantage of price differentials in other exchange rates while quickly using the Lightning Network to move assets, Chivo explained.

“The ‘scalping’ performed was to take advantage of the fact that Chivo kept the rate frozen for 1 minute and use that minute to compare the rate with other exchanges and see if the price of Bitcoin has gone down or up.”

Despite high-frequency scalping including a legal form of trading, Chivo describes traders who used Chivo’s frozen prices to arbitrate against real-time trades as extracting potentially “endless” profits through “fraud.” .

Going forward, Chivo plans to remove the price feature and offer real-time price benchmarks to Bitcoin traders using its app.

Related: El Salvador ranks third in global Bitcoin ATM installations, data shows

On September 7, El Salvador enacted its controversial Bitcoin law recognizing BTC as legal tender nationwide.

Despite criticism pointing to low digital and blockchain literacy rates among Salvadorans as the law approaches, the legislation appears to have fostered widespread adoption of Bitcoin through

Salvadorians now appear to be exchanging their US dollar savings for BTC at an accelerated rate, with President Nayib Bukele share that Chivo had registered 24,076 payout requests worth more than $ 3 million as of October 14.

El Salvador also announced its intention to invest a portion of the $ 4 million in profits from Chivo’s Bitcoin trust to build a new veterinary hospital in the local capital of San Salvador on October 10.



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