- El Salvador Bitcoin wallet maker Chivo has disabled its ‘price freeze’ feature which was allowing arbitrage opportunities
- Traders were using the Lightning Network and the price freeze feature to scalp profits
- Scalping is not illegal, but the use of the price freeze feature was problematic
Bitcoin scalpers in El Salvador who were using the Chivo wallet for arbitrage opportunities have found that their luck has run out after a change in the wallet’s ‘price freeze’ feature. Opportunistic traders had been using the price freeze feature to scalp for arbitrage opportunities across other crypto exchanges, but having cottoned onto what was happening, Chivo has removed the ability to see the reference price for trades executed using the price freeze feature, bringing the activity to a close.
Chivo Steps in to Quash Arbitrage Traders
Chivo addressed the issue of arbitrage yesterday tweeting that traders had been using the price freeze feature to make quick gains during periods of significant Bitcoin price volatility. The price freeze feature offered traders an opportunity to take advantage of price gaps across other exchange rates, using the Lightning Network to quickly move assets:
Hemos tenido que deshabilitar temporalmente la opción de ver el precio del Bitcoin congelado durante un minuto.
Lamentablemente, muchos de nuestros usuarios lo utilizaban para hacer “scalping”, que es legal, pero sin tener la opción de una tasa congelada.
— chivo (@chivowallet) October 18, 2021
As Chivo pointed out, arbitrage is not illegal, but the frozen rate was giving them a borderline illegal advantage, with the company describing the opportunities for traders who used its frozen prices to arbitrage against real-time exchanges as potentially bringing in “endless” profits through “fraud.”
In the future, Chivo plans to remove the price freeze feature entirely and will instead offer real-time price references for Bitcoin traders using its app.
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