The existence of cryptocurrency has caught people’s focus, particularly for them who really enthusiast with this digital asset. There are a lot of advantages offered by cryptocurrency, from convenient, profit, until security issues. While many people believe that doing the transaction in this digital platform is as secure as through conventional bank system, turns out several platforms are accused of doing illegal things. One of them is BitConnect. But is that true?
Before we jump into any further, let us discuss the basic understanding of what bitconnect is. BitConnect is a platform from bitcoin investment which released in 2016. At the very first place, its goal was promoting investment of bitcoin and touting it with information about investment software which able to boost to gain more returns.
Unfortunately, it has gotten huge pros and cons due to different claim from both contrast parties: user and detractor. There were so many claims from users about their ability to see notable returns, but the detractors said there were indications of fraud or Ponzi scheme.
To illuminate your knowledge, you need to understand what is the Ponzi scheme, why it is dangerous, and the connection with BitConnect. It is a sort of fraud investment that pays the returns to an investor with the money of another investor. If customers think the returns they get is coming from the product sales from the company. Well, it is wrong to begin with.
Since the returns are not from their profit, That is why every institution who relies on Ponzi scheme will promise into their user or client that the investment will gain so many profits above the standard investment method. Who doesn’t get lured with this kind of promise?
Why is BitConnect well-known considered as Ponzi scheme? This company guaranteed to the public that it was possible to gain initial investment for approximately 1% every day or nearly 3,780% each year.
This initial daily investment is given in the form of dividends. The amount of returns will depend on how many other clients who join this investment and the number of tokens available on their own.
Moreover, BitConnect uses its algorithm on their specially designed software to determine the profit, which automatically invests when the rate suddenly decreases and sells when the rate increases. But the further question is: how this algorithm works? Unfortunately, they never explain it transparently. All the thing they said is just a claim if this software is an omniscient program without any reason to worry about.
Whereas, it is essential information to be informed (at least to the authorities but the public deserves to know too). What kind of variables and how the way this system makes a prediction is crucial to be considered. Especially with the fact that this investment is rapidly growing.
At the moment they able to gain profit at a peak, which was roughly $3B market cap. With this fantastic number, no wonder if there was a distinction between the expected price of commerce and the price when the commerce was executed. This condition is usually called a slippage. The more volatile the market, the higher the possibility slippage condition occurs.
Every time slippage happens, then your action will determine the asset’s price because you indicate a more significant percentage of total commerce. What is odd here, the institution not only provides the profit in bitcoin but also US dollars. How come cryptocurrency using another currency besides bitcoin?
It doesn’t stop yet. To exacerbate this issue, BitConnect uses a system that is called as “referral bonus.” This method used to be published by various YouTube channels who concerned about crypto personalities things. Unfortunately, those channels now should deal with the court for their problematic recommendations.
The problem with these YouTube channels started when those YouTubers were able to gain profits as many as possible in line with the number of people they could be referred to. Until this point, we already knew that the way BitConnect worked to gain high rewards as long as the users can persuade others to get involved with this network.
But regardless of this YouTubers stuff, the method of this referral is quite similar with affiliate marketing. Why are people so on fire in recruiting many new members? It because they buy BitConnect promise about incentives whenever they get a new user.
There are three stages of reward for luring members. The first stage is when you can persuade your friends, and a 5% bonus will directly be added into your account. If your friends get more people to join, your bonus will be 3% no matter what kind of investment of this new buddy. And the last stages occur when the last people recruit another new member, and you will receive another 2% bonus.
Based on that data, we can assume that this investment system requires big recruitment culture and immense funding money to be injected to make sure the system well runs. Not to mention, this company still facilitate another bonus if users are investing a larger amount of investment in the platform, to begin with. That is why these incentives lead us to the bigger demand for BitConnect, and undeniable impact is the market value will significantly increase. With this bonus scheme, much more people believe it is considered a Ponzi scheme and cannot be tolerated any longer.
It will be so hard to lure people to join specific networking without any clear messages. One of the cores of BitConnect is proposing a software program which able to make bitcoin investment deal on behalf of BitConnect community. The essential idea to offer in BitConnect company is lending money from its funding system, which is BitConnect investment pool, can be done by everyone. And how the software can be useful is through handling that investment funds with a guarantee of return based on the real update of predictions. As a report, the lender will receive daily profit depend on the amount of their investment.
Like we said earlier, the average interest rate they promised is around 1%. With this promise, it triggers users to reinvest to gain much more returns in the next day and the day after. Whenever they finally invest more, the daily basis interest will jump into a prominent amount of returns regarding the daily compound. Take an example: $200 investment will get 1% daily profit means they will receive $214,42 over a week, $269,56 over a month and after 6 months you will gather $1199,16. Don’t get shocked quickly, because after a year you will see $74000 on your account. To get this money, all you need to do is $200 investment over a year.
The interest rate will not be the same for right, many variables involved, and we cannot just dismiss that. BitConnect guarantee for 120% maximum annual rate, not 3700% like our calculation before. But it doesn’t erase the fact that this percentage will surely make you question the truth and possibility of fraud.
Imagine, the promise of 120% yearly interest is not a lie, and then there is no other place I’d rather be to keep investing my money. On the other hand, the first principle of investing money is you have to be okay to deal with any risk of losing or gaining profit. It is a very common thing to happen. And it will be most likely impossible only to hope we will get profit with no mentality of the negative risk.
After talking about promises they are provided and the possible fraud things, let’s discuss more information about trading platform. To assist the commerce in BitConnect, the committee of this company created BCC token that can be gotten by purchasing it. This token is very functional to lend money or bet the proof of coin within the staking system. Based on the record, there are more than 3 million circulated BCC tokens with more than $400 value for each transaction. That value makes sense because it is a combination between proof of stake system and work which the verifiers get a reward from staking and mining.
Even though the reward sounds too tempting to be left, but this token doesn’t really functional if you don’t use it inside BitConnect. Only some vendor approve the usage of BCC token, but it doesn’t mean you can convert it to another token easily.
At the time you trade bitcoin into BitConnect, you will not directly get your earning in this cryptocurrency. Meanwhile, this company will make it into deposit token, and you need to switch it every time you want to withdraw. Sounds too unpractical? Well, it is a pretty common standard operational procedure for initial coin offering (ICO).
The question still unable to be answered: is that easy to pull out your penny when BitConnect is shut down right now? The biggest probability is you will get your money back in the same amount of your investment in the very first place.
The other indication which may more convince us about whether or not this system is illegal or legit is about the identity behind this platform. Unlike another technology discovery which the CEO or founder is globally famous, none of us know who runs the system of BitConnect.
In the official website, there is no clear list of information about a person or team related to this cryptocurrency technology company. Also, nobody knows exactly who runs or develops the entire software itself.
The only information we may collect as a consideration to measure their credibility is a list of who is their partner organizations. They also stated that they have delegates who represent this company in various industry conferences or technology conventions. Is this information enough to give you a picture of what BitConnect is?
Group of people who defend this institution always claims BitConnect is a private company who has prerogative right to keep the identity of leader, committee, or member of the team as privacy. And it really common thing to happen in any other big private company. But on the other hand, the rest of people who persistently critics them argue it is a sign of unbelievable business practice because they cannot be transparent with their basic information like a board of directors.
Wait a minute, did you know that BitConnect is currently shutdown?
Since 2018, BitConnect has closed down its operation due to the lack of trust from a bunch of parties. It is confirmed by their written through the official website that their shutdown is regarding of intensively bad publication coming from the press. Not to mention that severely continuous attack on that institution.
According to this latest news, no wonder if many experts said that the initial BCC tokens system is completely useless.
A year after the shutdown announcement, surprisingly there was another news that BitConnect will come back with “BitConnect 2.0.”. Without any effort to do rebranding while countless inventors, users, or any other cryptocurrency experts still feel wounded with the first version of BitConnect.
Their track record in the history is being used as justification reason for some people to accuse this new version of cryptocurrency institution as a scam, even though this new brand is not launched yet.
After knowing several arguments that prove it is a scam, maybe you are just curious on is it possible to stop the spread the Ponzi scheme practices to avoid further damages. Because of course, this is not one and only (relatively) illegal institution.
Ponzi scheme depends on the waves of a new member who join this system to pay dividends for existing users. If the member is still grown up, it is impossible to shut down this scam practice for good permanently. But if the new users stop joining, then this institution will have no enough investments to secure the payment of dividends.
In a nutshell, it is hard to believe in one opinion through this issue since you can easily find many good reviews online. But you can’t just neglect the criticism on how BitConnect works. It can be said that this is a valuable lesson, especially through the one who already becomes the victim, to make us consider everything before decide which investment which legal enough.