Altcoins

Bitconnect – What You Didn’t Know About It and How Investors Lost Their Money

Cryptocurrencies have gained a lot of popularity in the recent past, especially towards the end of 2017. That led to so many people who barely knew what virtual currencies are, to invest heavily in all kinds of virtual currencies and scams. Some did manage to make money, but for those who came later, they lost their money. Overall, the virtual currency has been unstable because people see virtual coins as a means to quick reaches, instead of a means to exchange good and services. Scammers have taken advantage of that attitude to create virtual coins that aren’t backed by sound technologies. In this article, we are going to look at BitConnect Coin, and discuss why you should avoid it.

What Is Bitconnect Coin (BCC)?

Bitconnect is an open-source project whose Coin made it to the top 10 CoinCodex listings and managed to hit its highest point in December 2017. The Bitconnect Coin appeared around January 2017, and it gained popularity steadily, thanks to a group of affiliates who used channels such as YouTube to promote it. From January 2018, it declined to about $12 as at the time of writing this article. Bitconnect claimed that it was under DDoS attack, and that is was planning to close its BCC Exchange platform on January 21, 2018,

Bitconnect claims that it helps people to store their wealth and even earn a substantial interest from it. By merely storing their wealth in the Bitconnect wallet, users will be able to enjoy huge interest rates, more than they would earn with centralized banking. The difference is that their money will not be under centralized government control, and they will receive a lot more from their BCC savings or BCC investments.

To offer those benefits, Bitconnect provides its members with several options, which they may use to interact with its network and make money. One thing that stands out from their system is that you must acquire Bitcoins first, and then buy BCC using your Bitcoins. However, when the time comes for them to pay you your interest, they don’t pay you in Bitcoins, instead, they pay you in dollars.

The Bitconnect Business Model

Staking

Bitconnect promises that if you buy its coins, you will earn based on how much balance you have in your Bitconnect-QT wallet. Furthermore, it promises up to 120% in interest for those who choose to do Proof-of-Stake (PoS) mining. The PoS miner is determined by a combination of factors, among them the amount of Bitconnect Coins you own.

Trading

Bitconnect encourages holders of the BCC to profit by selling their BCC coins at a higher price and then repurchasing it when the price falls. When selling the BCC on the BCC exchange, Bitconnect pays you in dollars, but when buying it, you must use Bitcoin,

Mining

BCC is mined using a CPU or GPU, and you can opt to mine as an individual or join a BCC mining pool. As a solo miner, the Bitconnect accepts once you provide Proof of Work. If you choose to join a mining pool, then the Proof of Stake system will validate your blocks.

Lending

Bitconnect promises vast returns if you buy the BCC then lend it to others. During the period that you have lent out your BCC, you cannot access the full amount. However, they pay you colossal interest rates. The large interest rates are the primary bait they have used to lure new cryptocurrency investors in huge numbers.

Moreover, if you successfully invite new members, Bitconnect promises to give you a cut of their earnings from each of the members you invited. They will also be able to earn from any new member they invite as well. Overall, what you get is a picture of a pyramid scheme, thinly veiled as a cryptocurrency investment.

Why the Bitconnect Model isn’t Sustainable

Most legit cryptocurrencies encourage people to use them to buy goods and services as a way to increase the coin’s value. On the other hand, Bitconnect encourages people to buy BCC with Bitcoin, and when the time comes to sell it, they pay you in dollars. The only time they want you to use it is when you invest it as a stake through their exchange.

In other words, they are buying your Bitcoins using BCC, whose demand is artificial, and then paying you in dollars. They don’t pay you back in Bitcoins, because they value them more than they value their BCC or the dollars. Overall, they ask you to buy Bitcoin on their behalf; they then buy them from you and give you their less valuable BCC.

Update

On January 16, 2018, Bitconnect announced the closure of their Exchange Platform, they said the shutdown would make it possible for the BCC to be listed on other Exchange platforms. Moreover, they said they were transferring each member’s lending BCC lending balance to the members Bitconnect wallet at a rate of $363.62,.

That means is if you had invested $363.62 with Bitconnnect, you are going to get only 1 BCC. Moreover, with the current exchange rate of $12, your $363.62 has reduced to about $12, at least for the moment, . We checked the Bitconnect Exchange platform, it’s still active. Moreover, Bitconnect has launched its Bitconnect X, ICO, and invited buyers from outside the USA to buy it at $150!

Pyramid Scheme

The huge bonuses they were paying members solely from new referrals are a classic example of a pyramid scheme. As you would expect, they wouldn’t be able to pay the huge bonuses if new members topped streaming in, and all they had were existing members. That’s because they aren’t making any investments. The payments they were making were coming from the purchase of BCC by the new members.

More Red Flags

The Texas State Securities Board ordered Bitconnect to “cease and desist operations.” The order came on January 3, 2018, after there were complaints about the secrecy with which Bitconnect was handling its financial transaction. Moreover, there were complaints that it wasn’t going to be able to pay back those who had invested in the BitConnect-QT wallet. Lastly, they were accused of using deceptive advertising without declaring risks associated with investing in BCC or cryptocurrency in general.

On November 7, 2017, they had also received a notice from the UK government demanding that they prove their legitimacy within two months. Otherwise, they would be dissolved and all their assets confiscated. Such an action would mean investors who already have their money in the BitConnect-QT wallet would probably lose it.

It’s with that in mind that we encourage you to tread cautiously when investing in BCC. If you must invest in Bitconnect, then do so with money you are comfortable losing. Otherwise, we recommend that you invest in the more credible and transparent cryptocurrency platforms.

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