The El Salvadorian government has taken action to prevent users of the Chivo digital wallet from manipulating the app’s price freeze feature to generate risk-free profits through arbitrage.
Chivo’s Twitter account announced on Tuesday that wallet users cannot see the reference price offered for trades made using the price freeze feature, allowing traders to keep the bitcoin (BTC) price moved by the app for up to one minute.
Chivo tweeted that opportunistic traders use the price freeze feature to arbitrage on other cryptocurrency exchanges around the world during periods of significant bitcoin price volatility. Chivo explained that the frozen interest rate feature allows traders to take advantage of price differences in other exchange rates by quickly using the Lightning Network to transfer assets.
The “speculation” was to take advantage of the fact that Chivo kept the price frozen for one minute and use that minute to compare the price with other exchanges and see if the price of bitcoin fell or rose. ”
While high-frequency speculation is a legitimate form of trading, Chivo describes traders who have used Chivo’s frozen prices to balance against real-time exchanges as making “infinite” profits through “cheating”.
Looking to the future, Chivo plans to remove the pricing feature and provide real-time price links to bitcoin traders using the app.
Related: El Salvador has the third largest number of Bitcoin ATMs in the world, according to data
On September 7, El Salvador passed a controversial bitcoin law that recognized bitcoin as the legal currency nationally.
While critics highlighted the low level of digital reading and blockchain reading skills among Salvadorans ahead of the law’s entry into force, it appears that the law has increased the widespread adoption of bitcoin across the country.
It is now revealed that Salvadorans are swapping USD savings for BTC at an accelerated rate, as President Neb Bukele explained that Chivo had filed 24,076 transfer requests for over $ 3 million on Thursday.
In October, the El Salvadorian government also announced plans to invest a portion of the $ 4 million profits from the Chivos Bitcoin Fund to build a new veterinary hospital in the local capital of San Salvador.