The Salvadoran government has moved to prevent users of its Chivo digital wallet from gaming the app’s price freeze feature to glean risk-free profits through arbitrage.
On Tuesday, Chivo’s Twitter account announced that wallet users will be unable to see the reference price provided for trades executed using the price freeze feature — which allows traders to retain the Bitcoin (BTC) price quoted by the app for up to one minute.
Chivo tweeted that opportunistic traders have been using the price freeze feature to scalp for arbitrage across other cryptocurrency trading platforms globally during periods of significant price volatility for Bitcoin. The frozen price feature gave traders an opportunity to take advantage of price gaps in other exchange rates while quickly using the Lightning Network to move assets, Chivo explained.
“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.”
Despite high-frequency scalping comprising a legal form of trading, Chivo describes traders who used Chivo’s frozen prices to arbitrage against real-time exchanges as being extracting potentially “endless” profits through “fraud.”
Looking forward, Chivo plans to remove the price feature and offer real-time price references for Bitcoin traders using its app.
Related:El Salvador ranks third in global Bitcoin ATM installations, data finds
On Sept. 7, El Salvador enacted its controversial Bitcoin Law recognizing BTC as legal tender nationwide.
Despite critics highlighting the low rates of digital and blockchain literacy among Salvadorans in the run-up to the law taking effect, the legislation appears to have fostered widespread Bitcoin adoption across the country.
Salvadorans now appear to be exchanging their United States dollar savings for BTC at an accelerating pace, with President Nayib Bukele sharing that Chivo had recorded 24,076 remittance requests worth more than $3 million on Thursday.
On Oct. 10, the Salvadoran government also announced its plans to invest part of the $4 million worth of profits from Chivo’s Bitcoin trust to construct a new veterinary hospital in the local capital of San Salvador.
If Bitcoin becomes legal tender in a massive country like Brazil, it would be monumental. However, is that plan really on the table? Here are the facts: 1.- A bill to regulate cryptocurrencies was discussed and approved in Brazil’s House of Representatives, but it still has a long way to go before it becomes law. 2.- The bill’s author, deputy Aureo Ribeiro, said in a recent interview that he wants cryptocurrencies to be legal tender in the country.
Related Reading | Ether EFT Gets Approval From Brazilian Securities Regulator
The question is, are the two facts connected? That’s what we’re here to explore.
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Will Bitcoin Be Legal Tender In Brazil Soon?
That was the headline the whole crypto-media ran with. Their minds connected fact one with fact two and their articles almost wrote themselves. It was only logical. Sadly for their credibility, they were wrong. The second fact is only Aureo Ribeiro’s thoughts and wishes, but those ideas are not present on the bill. The bill aims to regulate cryptocurrencies and wants exchanges and other service providers to register.
In a Twitter thread, Brazilian journalist Saori Honorato clears things up leaving nothing to the imagination. “the bill DOES NOT make any mention of bitcoin becoming a legal tender in Brazil. This bill has been in development since 2015 and giving bitcoin the status of ‘legal tender’ is something that has never even been considered in Brazil.” In fact, a search onthe bill itselfreveals that it doesn’t mention “Bitcoin” once. Enough said.
2) The recent statement of deputy Aureo Ribeiro (the author of the bill) in which he says that brazilians will soon be able to pay at mcdonald’s and buy houses with bitcoin is nothing but a personal opinion. Don’t get confused.
— Saori Honorato (@saorihonorato) October 4, 2021
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To sum it all up, it’s a cryptocurrencies-focused bill whose content has been heavily discussed. Is there something new in there?Honorato again, “An extra of the bill is that it determines the increase in the penalty for crimes committed using crypto, such as money laundering. If the law is approved, anyone caught laundering money with crypto could get up to 16 years in prison in Brazil.”
What Did Aureo Ribeiro Say To The Press?
Theinterview in question was with Radio Camara, which covers the Chamber of Deputies. It happened after the bill was approved, that might’ve been what originated the confusion. The title says it all: “Regulation of cryptocurrencies will attract new investments to Brazil.” It’s about cryptocurrencies in general. It’s not about Bitcoin in particular. Could this be a case of journalists mistaking one term for the other? Does Aureo Ribeiro know the differences between Altcoins and Bitcoin?
The quote that everyone ran withcomes from Livecoins, whose article says that it refers to a Bitcoin Law:
“We want to separate the wheat from the chaff, create regulations so that you can trade, know where you are buying, know who you are dealing with. And have this asset to buy a house, a car, go to McDonald’s to buy a hamburger, it will be a currency in the country as it happens in other countries.”
Is Ribeiro talking about Bitcoin or cryptocurrencies in general? It’s hard to tell. One thing’s for sure, though, he’s not affirming nor guaranteeing until the last sentence. And even that one can be interpreted as wishful thinking.
On the Radio Camara site, they only mention Bitcoin once and it’s to clarify what cryptocurrencies are. “Cryptocurrencies, of which Bitcoin is the best known,” they say. Describing the interview, they tell us that it’s actually about regulation and control.
“The congressman emphasizes that the text prevents the formation of financial pyramids by groups that commit fraud with the purchase and sale of virtual assets, by determining that every operator is registered with economic sector bodies, with inspection by the Activities Control Council Financial (Coaf).”
Nobody is talking about freedom money. Nobody is talking about Bitcoin.
BTC price chart for 05/10/2021 on Cexio | Source: BTC/USD on TradingView.com
Conclusion: Who’s Confused?
Of the consulted sources, only Livecoins mentioned a Bitcoin Law. Did they confuse all the crypto journalists? Or did they confuse themselves? Who’s the one that doesn’t know the difference between Bitcoin and all the other cryptocurrencies? Is it Aureo Ribeiro or is it the press? The language barrier prevents us from going deep and figuring all of these details out, but Saori Honorato answers the most important question, “the bill DOES NOT make any mention of bitcoin becoming a legal tender in Brazil.”
6) And now what? Last week, the bill was approved by a special committee of the Chamber of Deputies and now goes to the Chamber’s Plenary. If approved by deputies, it advances to the Senate to be discussed once more and, if approved, goes for the president.
— Saori Honorato (@saorihonorato) October 4, 2021
Since she was the most reliable source of information, let’s finish this by quoting her about the future of the bill. “Last week, the bill was approved by a special committee of the Chamber of Deputies and now goes to the Chamber’s Plenary. If approved by deputies, it advances to the Senate to be discussed once more and, if approved, goes for the president.“
Related Reading | Why Bitcoin Declared Legal Tender Could Have Major Implications Beyond El Salvador
Those are the facts. We separated the wheat from the chaff.
Featured Image by Rafaela Biazi on Unsplash - Charts by TradingView
The day is here. In a few hours, El Salvador’s Bitcoin Law goes into effect. We will have the first real-world example of a whole nation using the hardest money ever created as legal tender. And, how is the Bitcoin community celebrating? Stack sats, obviously. The order is for everyone to buy $30 worth of BTC to commemorate this glorious occasion. Will you participate?
Related Reading | The 411 On “Adopting Bitcoin,” A Lightning Network Conference in El Salvador
The intention is not to move the dial or pump the price. The amount is small enough to guarantee that, even if the event goes viral. Which it seems like it’s doing. The movement started humbly, with a Reddit post in the /r/Bitcoin community that asked a simple question.So… We all buying $30 worth of Bitcoin on Tuesday?At the time of writing, the idea has 8.9K upvotes and 2.2K commentaries.
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Among the comments, some went all-in. “I will buy $3000 tuesday to cover 99 others who arent able to pay.” Others explained away, “Its to show solidarity with our Bitcoin compatriots in El Salvador as they fully adopt Bitcoin as their currency.” And other rightfully criticized, “Sure. Lets just coordinate a 100 mil pump of BTC. Correct me if I’m wrong but this sounds greasy.”
And, sure enough, the idea to back El Salvador’s Bitcoin Law spread to other social networks.
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Bitcoin Twitter Will Support El Salvador’s Bitcoin Law
The plebs work fast. As soon as the idea transcended Reddit and got to Bitcoin Twitter, the memes appeared. This piece of art mixes the classic comedy “Trading Places” with El Salvador’s Bitcoin Law, with gold bug Peter Schiff and Bitcoin hater Nouriel Roubini to achieve hilarious effects:
On the 7th of September #Bitcoin becomes legal tender in #ElSalvador.
Plebs and memers unite!! Like, retweet and buy #BTC on the 7th.#7SeptemberBuyBTC@Nayibbukele#LeyBitcoin#Memepool@MoscowMemetards@MemeFactoryTM#Memetards pic.twitter.com/u3rWWGbItr
— Sir William of Orange Pills (@OrangePillWilly) September 5, 2021
Even MicroStrategy’s CEO and notorious Bitcoin enthusiast joined the party. Michael Saylor did his part to support El Salvador’s Bitcoin Law and spread the word to the sizable audience that follows him.
This worries me more than anything. We are at major retracement levels for the price and Michael saylor is getting retail to buy. If the bear market starts this week I wouldn’t be surprised.
— Golde 🔜 EDCLV2021? (@all41and14alll) September 6, 2021
Of course, this raised suspicion. “Everyone needs to be aware that this could possibly be leading the sheep to their death. Very nerve wracking these narratives are coming out before we hit the HUGE retracement levels,” said one commenter. “A hole. Letting retail buy exactly on the 70.2% retracement to dump on them huh,” said another. “If the bear market starts this week I wouldn’t be surprised,” predicted a third one.
Are they on to something or are they missing something? Michael Saylor strongly stated that MicroStrategy is not looking to sell any of their BTC any time soon, but, people have lied before. Do you know what doesn’t lie, though? Bitcoin. If Michael Saylor and company sell on El Salvador’s Bitcoin Law’s day, people will know. The same thing will happen if they buy.
BTC price chart for 06/09/2021 on Oanda | Source: BTC/USD on TradingView.com
The International Community Will Also Buy $30 Worth Of BTC
Here, we can see a Korean bitcoiner translating the order to support El Salvador’s Bitcoin Law and the community from that side of the world responding below.
[6월24일 엘살바도르는 국민 1인당 30$어치 비트코인을 지급하기로 했습니다.]
이것을 기념하기위하여 300만명의 브라질 커뮤니티에서 다같이 30$를 구매하자고 시작한 이벤트입니다.
이것은 엘살바도르의 지원을 의미합니다. #bitcoin#ElSalvador https://t.co/2I9zZkWPRA pic.twitter.com/QD1ntWevRd
— ATOMIC⚡️ BITCOIN (@atomicBTC) September 6, 2021
It’s curious that the translated tweet, one of the first ones in that social network, talks about a Brazilian Bitcoin Community and that they’re doing it “remembering that Sep 7th is Brazil’s independence Day.” As far as we can tell, they link to the same /r/Bitcoin post we identified as the origin and almost all of the posts there are in English.
Related Reading | Michael Saylor Brings The Thunder To Venezuelan Bitcoin-Only Podcast
It’s also curious that the Satoshi Nakamoney character keeps adding up to the story as it progresses, and ends up declaring.“To be clear: massive #bitcoin buy will happen at 3pm of El Salvador time zone.”
Can you think of anything else in the world bringing people together as much as #Bitcoin is right now?Anything even at any time in your life?
Have you ever felt such benevolence to strangers from different nations, religions and other affiliations as you do toward bitcoiners?
— Tomerrrr Strolight – Slayer of Lies (@TomerStrolight) September 6, 2021
Will this collective action pump the price as El Salvador’s Bitcoin Law goes into effect? Maybe the plebs can’t do it by themselves, but what about doing it with Michael Saylor’s help? Another fascinating activity to monitor tomorrow. Legal Tender day is here.
Featured Image: Bitcoin Day Flyer | Charts by TradingView/a>
A Disruptiva survey found that most Salvadorans disapprove of the government’s new Bitcoin legislation.
Additionally, 46% of respondents said they knew “nothing” about Bitcoin.
The Salvadoran government will need to provide more education for its citizens regarding Bitcoin adoption.
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A survey conducted by pollster Disruptiva found that 54% of Salvadorans did not approve of the government’s plan for Bitcoin adoption.
Salvadorans Skeptical of Bitcoin as Legal Tender
El Salvador’s new Bitcoin legislation may be less popular than anticipated.
A survey conducted by Disruptiva, a pollster affiliated with Francisco Gavidia University, found that 54% of Salvadorans viewed Bitcoin adoption as “not at all correct” while another 24% described it as “only a little correct,” Reuters reported Thursday.
The survey, conducted between Jul. 1-4, was answered by 1,233 people in the country.
Reflecting on the results, Oscar Picardo, head of Disruptiva’s institute of science technology and innovation, said that the adoption of Bitcoin as legal tender was “a risky bet on digital transformation.”
Disruptiva’s survey is not the first time El Salvador’s Bitcoin adoption has faced resistance. In June, the opposition party in El Salvador moved toblock the new legislation, calling it unconstitutional and baseless. Additionally, a previous polltargeting entrepreneurs in El Salvador found that 45.3% of respondents worried about Bitcoin becoming mandatory and 35.9% distrusted the new law.
President Nayib Bukele’s government made history in early June when it passed a billto make Bitcoin legal tender. The bill was approved by a supermajority in the Salvadoran congress, receiving 62 out of 84 votes. Despite strong governmental support, it seems that many people in El Salvador are still apprehensive about the change.
The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
History! #Btc🇸🇻
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
Bukele’s government has presented Bitcoin as a way to facilitate remittance payments from citizens living and working overseas. In 2019, World Bank data showed over 20% of El Salvador’s GDP came from remittances, one of the highest proportions in the world.
Disruptiva’s survey also found that 46% of people in El Salvador knew “nothing” about Bitcoin. It seems that while Bitcoin adoption has the potential to help the average El Salvadoran through cheaper and easier remittances, the lack of education on the subject is creating distrust. For example, many Salvadorans incorrectly believed Bitcoin payments would become mandatory until President Bukeleaddressed the issue on Jun. 24.
If El Salvador’s government wants Bitcoin adoption to be a success, it will need to ensure all citizens understand what the new legislation will do and how it will affect their day-to-day lives.
Disclaimer: At the time of writing this feature, the author owned BTC and ETH.
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Steve Hanke, a professor of applied economics at Johns Hopkins University, has warned that El Salvador’s recent adoption of Bitcoin (BTC) as legal tender has the potential to “completely collapse the economy.”
Steve Hanke served as a senior economist under President Ronald Reagan administration from 1981 to 1982. Hanke has previously described BTC as a speculative asset “with a fundamental value of zero,” and in April the 78-year-old tweeted “cryptocurrencies are the future of money. Bitcoin is not.”
Speaking with streaming financial news provider Kitco News on June 15, the university professor noted that BTC hodlers from regions such as Russia and China could now target El Salvador to cash out their holdings — essentially draining the country of its U.S. dollars:
“It has the potential to completely collapse the economy because all the dollars in El Salvador could be vacuumed up and there’d be no money in the country. They don’t have a domestic currency. ”
During the interview, the economist described the elected representatives in El Salvador who voted in favor of president Nayib Bukele’s Bitcoin law as “in a word, stupid,” and questioned how BTC could function as a legal tender in day to day transactions, in a country where most citizens rely on cash.
“You’re not going to pay for your taxi ride with a Bitcoin. It’s ridiculous […] You’ve got 70 percent of the people in El Salvador don’t even have bank accounts,” he said.
On June 11, JPMorgan echoed similar sentiments but in more measured language, with the firm stating in a client note that it was difficult to see any “tangible economic benefits associated with adopting Bitcoin as a second form of legal tender, and it may imperil negotiations with the IMF. ”
The Central American Bank for Economic Integration (CABEI) doesn’t share this view however and stated yesterday that El Salvador’s adoption of BTC is innovative and “creates many spaces and opportunities. ”
The multinational bank also revealed that it will be forming a technical advisory group to aid El Salvador in its transition to using Bitcoin as legal tender.
Professor Hanke speculated that “dark forces are clearly behind this” in El Salvador, who want to use Bitcoin to get their hands on U.S. dollars.
Related:El Salvador reportedly weighing paying employees in Bitcoin
The economist also described remittances across borders in Bitcoin as “nonsensical,” as he thinks the asset will need to be converted instantly to dollars to be able to use it.
“If grandma is down in El Salvador is waiting for her remittances and you want to send Bitcoin like that it’s fine, but what does she do? She has to go to the ATM to get dollars because that’s the only way you can buy something,” Hanke said. However, businesses in El Salvador will be mandated to accept Bitcoin.
An article in Foreign Policy by trenchant Bitcoin critic David Gerard, author of the book Attack of the 50 Foot Blockchain speculated that as El Salvador can’t print U.S. dollars, its adoption of BTC may be part of a move to source U.S. dollar liquidity from its citizens to pay back foreign debts.
Let’s not kid ourselves, a person like Steve Hanke has enormous incentives to defend the status quo. He’s benefited tremendously from it. It could be argued that his livelihood depends on Bitcoin failing. A project to make it legal tender in any country goes directly against Hanke’s interests, and it’s no wonder he spoke against it. The insult was over the line, though.
We´re going to take the higher road and elegantly answer all of his points. The tweet in question was this one:
#Paraguay congressman Carlitos Rejala seeks to make #BTC legal tender. How stupid can you be? #Bitcoin is NOT a store of value, medium of exchange, or a reliable unit of account. Its volatility is an obvious reminder that it is merely a highly speculative asset, NOT a currency. https://t.co/BZXA9Y9i3N
— Steve Hanke (@steve_hanke) June 7, 2021
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Is Bitcoin A Store Of Value?
Who decides this? The people. If one person uses an asset to safeguard his wealth, then it’s a store of value. The question then is, is Bitcoin an effective store of value? Well, considering it’s the only commodity in the history of the earth that presents absolute scarcity, it’s probably a safe bet. Make no mistake, though, it’s still a bet. The Bitcoin experiment is an ongoing process and nothing is set in stone.
Related Reading | Why Bitcoin Declared Legal Tender Could Have Major Implications Beyond El Salvador
Scratch that,onething is set in stone. There will only ever be 21 million bitcoins. The supply is fixed, so if the demand increases, the price will go up. It’s as simple as that. To add credibility to the argument, let’s quote Saifedean Ammous’ “The Bitcoin Standard”:
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Until Bitcoin’s invention, all forms of money were unlimited in their quantity and thus imperfect in their ability to store value across time. Bitcoin’s immutable monetary supply makes it the best medium to store the value produced from the limited human time, thus making it arguably the best store of value humanity has ever invented. To put it differently, Bitcoin is the cheapest way to buy the future, because Bitcoin is the only medium guaranteed to not be debased, no matter how much its value rises.
Did you know that 40% of all US Dollars that have ever existed were printed in the last twelve months? That’s what debasement looks like. And the whole world is feeling its effects.
Is Bitcoin A Medium Of Exchange?
Our friend Steve Hanke was answering Paraguay’s congressman Carlos Rejala but, as you probably know,the first country to approvebitcoin as legal tenderwas El Salvador. This is not a coincidence, since “a real village with real Bitcoin uses in daily life” is right there in El Salvador.
TheBitcoin Beachproject is also the main real-life use case for the Lightning Network. If there’s a place in which small Bitcoin transactions are an everyday thing, it’s this one. AsNasdaqinformed last year, when the project was still developing:
In the flagship Bitcoin village of El Zonte, for example, you can use bitcoin to pay for a haircut, get your nails done and chow down on some local dishes (like some delicious pupusas). Soon, you’ll even be able to buy a cup of coffee with it and go to the doctor’s office for a checkup.
If there’s any doubt that Bitcoin Beach was the inspiration for El Salvador’s historic move, Stephan Livera paraphrases what President Bukele said on Clubhouse:
Bukele: Bitcoin beach team demonstrated that this is not for rich people only. A community can benefit from Bitcoin. And now we’re going to demonstrate it on a country wide scale.
— Stephan Livera (@stephanlivera) June 9, 2021
So yeah, Bitcoin is a proven medium of exchange with real-life use cases. We could include the incredible amount of Bitcoin transactions that the virtual world sees every day, but there’s no need.
BTC price chart on Bitbay | Source: BTC/USD on TradingView.com
Is Bitcoin A Reliable Unit Of Account?
Let’s admit it, Bitcoin’s price is volatile. Why is that? Let’s quote “The Bitcoin Standard” once again:
As it stands, given that Bitcoin constitutes less than 1% of the global money supply, large individual transactions in Bitcoin can have a large impact on price, and small variations in demand can cause large swings in price. This, however, is a feature of the current situation where Bitcoin as a global settlement network and currency is still a tiny fraction of global settlement payments and money supply.
Bitcoin is still in its infancy. You can’t ask a 12-year-old child to behave like an adult. What does it need to grow? Nurture. And since it IS a currency, nurture is equivalent to widespread adoption. This is exactly what’s happening, with all of these countries considering emulating El Salvador in making Bitcoin legal tender.
Related Reading | Time To Pay Attention: Bitcoin Indicator Behavior Mimics Historic Rally
If Bitcoin becomes the global reserve currency of the world, volatility won’t be a problem. And the whole planet will be a level playing field because one country won’t have the immense privilege of issuing the global reserve currency. And debasing it at will.
