Today I want to break down how Bitconnect is winning the trust and money of thousands of self-proclaimed investors.
First things first: What is Bitconnect and what do they claim they do?
To quote their homepage:
BitConnect is an open source all in one bitcoin and crypto community platform designed to provide multiple investment opportunities.
The investment process goes as follows: You buy some BitConnectCoins (BCC) either from an exchange or directly from them. Then you can put them into “lending”. By lending, they mean a magical process that generates about 1% profit every day. The profit is calculated in USD and paid out in BCC. Once you put money into “lending”, there is no way of getting it back out apart from the daily interest payments.
Another way of earning money is their referral program.
How does the scam work?
They are not using one scheme but rather a combination of several to hide their evil intentions and keep on going.
The most obvious thing they are doing is a so-called "Ponzi scheme". They pay old investors with the money they get from new investors without ever doing legitimate business to earn money. Such a system breaks down as soon as the stream of new investors is not increasing exponentially anymore. To keep this going as long as possible, two other systems are employed. Increasing the life of a Ponzi scheme can be done in two ways:
- Minimize the money that is actually paid out
- Maximize the flow of fresh money by new investors.
In traditional Ponzi schemes, the payout is minimized by pressing investors to reinvest their profits right away. Bitconnect has another great technique: They don’t pay out at all! They have never paid out a single dollar in BTC, they just give investors BCC, a currency over which they have full control. If you are lucky, you can sell your BCC to someone else, but the money that was used to initially buy BCC from Bitconnect.co is never coming back. If a lot of people sell BCC, the price will drop fast and the scam is exposed. That does not happen, because most of it is locked in lending contracts. Even if someone doesn’t reinvest all their profits, they will most likely hold his BCC because he might have FOMO (Fear Of Missing Out). This is what you could call a “shitcoin-scheme”. People are fine with being paid in some new currency because crypto is the new shit right now.
To steadily increase the flow of new money, they have a sophisticated referral program that consists of 11 steps. Because of this, many bloggers and YouTubers advertise Bitconnect for free. For me, any business that has a referral program with more than one step is very shady. They are often called “Pyramid-schemes”.
But I have been making money! This cannot be a scam!
Yes, that is just how Ponzi schemes work. They only break down when not enough new money comes in. The will probably hide the fact that they are about to collapse by finding excuses for not paying out money (for example “website is down because of server glitch” cough cough), but they will eventually close down forever and run away with your money.
I hope that I could help some people deciding against Bitconnect. Businesses like that are ultimately the cause why the crypto world has such a bad reputation. Hopefully, that will change in the future.
If you liked my little posts, consider upvoting, resteeming and following. Thanks a lot!
They are back online now but it looks like you can't withdraw, prompting people to reinvest!!
.You are right many websites have done same thing.
I also agree with you and invester must beware of such scams.
There are actually other ways they could be making money. Here is a video I made explaining, what could be the trading bot:
This is an article I wrote about it:
https://steemit.com/bitconnect/@cicnos/bitconnect-how-does-the-trade-bot-operate
good one - it could work just like you say and its fine as well - as long as the price of BTC is going up
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