Customers of the Salvadoran government’s Chivo wallet will be unable to see frozen price quotations until the function is disabled in order to discourage arbitrage scalpers.
The Salvadoran government has taken steps to prevent users of its Chivo digital wallet from using the app’s price freeze function in order to benefit from risk-free arbitrage.
On Oct. 19, Chivo’s Twitter account stated that wallet users will no longer be able to view the reference price for transactions completed using the app’s price freeze function — which enables traders to preserve the app’s Bitcoin (BTC) price for up to one minute.
Chivo stated that during times of high price volatility for Bitcoin, opportunistic traders have been utilizing the price freeze function to the scalp for arbitrage across other cryptocurrency trading platforms worldwide. The frozen pricing feature enabled traders to profit from price differentials in other currency rates while rapidly transferring assets through the lightning network, Chivo said.
“The ‘scalping’ carried out consisted of taking advantage of the fact that Chivo kept the rate frozen for 1 minute and taking advantage of that minute to compare the rate with other exchanges and see if the price of Bitcoin went down or up.”
Chivo intends to eliminate the pricing function in the future and instead provide real-time price references to Bitcoin traders who use its app.
El Salvador passed its contentious Bitcoin Law on September 7, establishing BTC as legal currency across the country. Despite opponents’ assertions that Salvadorans lacked digital and blockchain literacy in the run-up to the law’s implementation, the legislation seems to have facilitated broad Bitcoin adoption throughout the country.
Salvadorans seem to be rapidly swapping their US dollar savings for BTC, with President Nayib Bukele reporting that Chivo has received 24,076 remittance requests totaling more than $3 million on Oct. 14.
El Salvador also announced intentions to contribute a portion of the $4 million in earnings generated by Chivo’s Bitcoin trust towards the construction of a new veterinary hospital in the country’s capital, San Salvador, on Oct. 10.
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