BitConnect Ponzi 101
Just about anybody who has been in the cryptocurrency world for more than a minute has at least heard of the infamous BitConnect. The word “BitConnect” is now synonymous with the words “Pyramid Scheme” and “Ponzi.” BitConnect created a huge following and now is the precedent for any crypto related scam, hustle, or con. Learn when BitConnect was around, what happened, and how to spot a Ponzi in the article below.What was the BitConnect Scheme?
So what was BitConnect?
BitConnect originally surfaced on a BitcoinTalk forum in late 2016. By 2017 the ICO BitConnect had garnered a huge following and was even considered to be one of the best ICO investment opportunities of the year. Flying up the ranks on coinmarketcap, BitConnect gloated a $2.6 BILLION market cap and a coin value of over $400 each at its pinnacle.
How did BitConnect work?
BitConnect offered users an investment platform where a client could sign up on their website and invest their money into the platform using Bitcoin. The Bitcoin invested would instantly be converted into the BitConnect token, BCC. Interest would be earned in BCC, NOT BITCOIN, and deposited into the investors account from the companies earnings. Earnings were supposed to be accumulated through the use of BitConnecet’s trading bot. The large profit margin or ROI, (return on investment,) of 1% per day is what attracted most of the greedy investors. BitConnect claimed 1% profit per day no matter what the current market conditions. This should be a large red flag to any person with half a brain and a bag full of BTC. If something seems too good to be true, it usually is.
Didn’t BitConnect sustain for a while?
BitConnect was able to sustain its members and make it look like a successful business by utilizing some creative thinking and obvious warning signs that were apparent to anyone who did the tiniest bit of digging. The BitConnect ICO used a POS or proof-of-stake coin mining system. This means that BitConnect was able to do a pre-mine of well over 4 million coins. The POS system also allowed token holders to be rewarded interest for simply HODLing their coins. With an almost 5 million coin premine, you can bet that BitConnect held on to a ton of their own coins. BitConnect rewarded token holders with 10% per month the first six months of their ICO. The tokens that BitConnect were paying their investors with were not from trading revenues at all. BitConnect was able to pay investors 1% interest per day because they were paying in BCC tokens that they had premined millions of! The paying of interest or dividends in a token that had no real work put into it when created! Anyone who saw that BitConnect had such a large premine amount would have been able to put the scam together.
BitConnect was huge though? How?
The BitConnect marketing team was an incredible feat among itself. A product that offers a 30% return per month pretty much markets itself. BitConnect instilled a multi-level affiliate marketing system, (MLM) to keep the new investors rolling in day after day. This is where the Ponzi claims started to come in. Naysayers stated that BitConnect needed to sustain new accounts constantly to keep the scheme going. A run of the mill pyramid-scheme, BitConnect rewarded its MLM troops with a tiered commission referral system. This should be another red flag to smart investors, however, people dove right in head first. The average person wants to succeed, and this is why schemes like this take off so fast.
Cease and Desist
BitConnect’s large run ended in January of 2018 when the company was slapped with an order to close down operations and halt the issuing of BCC buy the Texas Securities Board. The North Carolina Securities Division followed Texas with separate cease and desist order to the BitConnect parent company a week after the first was served.
What have we learned?
BitConnect has become indistinguishable with the words scam or Ponzi. Especially as it relates to the cryptocurrency world. Many investors have learned a grave lesson from the BitConnect fiasco. Many have not. Sure we all want to make it rich one day and have dreams of tropical islands, Lamborghini’s, and Mojitos with tiny umbrellas in them. It’s okay to have those dreams. Just don’t sacrifice your livelihood on a “chance” that one day you could make it big. Never put all your eggs in one basket. Diversify and your chances of success will grow exponentially.
Are there any Legitimate Platforms?
There are real investment platforms out there that can make someone a steady passive income?
Finding the Diamond in the rough is the key to keeping your money working for you and to not get too greedy or overextended. I do use a couple of Telegram investment bots like icenter to multiply my crypto personally, however, I am in no way a financial advisor. All I can say is have a look if you like, and NEVER invest more than you can afford to lose.
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Sources:
https://medium.com/@anesthesteve/bitconnect-explained-c68dd2daef2f
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