Bitconnect has been under a lot of fire recently with accusations of being nothing but a Ponzi scheme. Whether it is or isn’t will never be known until if and when it ever collapses. However, I also noticed that many people are still unaware of what Bitconnect does or how they claim to operate and make their huge profits. I think it’s important that people understand Bitconnect because they are approaching a market cap of $1 Billion and if they do collapse and turn out to to be a Ponzi scheme, it will effect everyone who is involved in crypto currency, either by depressing the market, or bringing the attention of regulators. Not to mention, a loss of a nearly a billion dollars will make it to every news media outlet, damaging the public’s perception of crypto currency.

First off, let’s begin by looking at the telltale signs, or common themes in all ponzi schemes.

They focus most of their efforts on finding new investors. This is where they spend most of their resources instead of their actual service or product. The vehicle for their profits is often described in vague language such as “new investing techniques” or “revolutionary new technology to earn money”. The details of these money generating techniques or investments are never revealed. They require you to lock your money up for a specific period of time, so you are not able to liquidate your position or pull money out.

Bitconnect is described as a lending service. From their website, they claim that by lending Bitconnect your BTC (After you convert it to their own BCC token), and from then on you earn daily interest. From there, you are not allowed to retrieve your original investment for a specific period of time. Usually 120 days or more. In the meantime, your original BTC is “loaned” to what appears to be their exclusive automated trading bot, which trades and invests all the BTC that is loaned through the service. This trading bot, the details of which are not released, has a near perfect trading history, or so it is claimed, and this is how you can earn such high interest rates on your loaned BTC.

I would assume by now your biggest question would be about this so called trading bot. If someone had created a trading bot that always made money, why would they go through the hassle of setting up a company like Bitconnect, wouldn’t they just find a few wealthy investors to show it to and then trade with it, earning huge profits everyday without the trouble or hassle of running Bitconnect or attracting unwanted attention?

Bitconnect also borrows a technique from Multi Level Marketing or “MLM” style companies. With Bitconnect, if you become an investor and you get other people to sign up and loan their BTC, you will receive a portion of their earnings as well. And this goes for everyone you sign up under your referral link, so there is a huge incentive to get new sign ups and new investors into the system. In fact, based on most positive reviews of Bitconnect on social media, virtually everyone is simply trying to get people to sign up as new investors under their referral link. If you remember back to earlier in the article, this seems very similar to the first hallmark of a Ponzi scheme, and that is focusing all efforts on finding new investors.

But now we come to the $800 million dollar question, how long can Bitconnect keep bringing in new investors to keep this whole operation afloat? The answer is, we simply don’t know. We don’t know how much the operators of the site itself are pulling money out of the system, we also don’t know if there even is a trading bot of any kind actually getting returns or is Bitconnect simply using new investors to pay off old investors.

The one thing we do know is that the price of Bitcoin keeps going up. This is something that will allow Bitconnect to go on for much longer than if it were just a regular Ponzi style investment scheme where new investors pay off the old investors. Because of the rise in BTC price, they can keep this going for an almost indefinite amount of time assuming they manage it correctly. But before you get all excited over that last statement, I urge you to consider whether or not they are managing it right. Also, if BTC spends any length of time in a bear market where the price is not rising by leaps and bounds it would probably cause huge issues for Bitconnect to continue operations and paying out to customers. How long that would take is anyone’s guess as nobody has any knowledge of how Bitconnect works, not even the investors who are promoting it so heavily. But the more people in the system, meaning the bigger it is, the less time it can probably spend in a BTC bear market before not being able to make payouts.

Another issue is regulation. If regulators start looking into Bitconnect and decide it very well could be a Ponzi scheme and announce those findings or start an official investigation, that would probably cause a huge drop off in new investors, which would also make it very difficult for Bitconnect to continue unless that trading bot was truly posting some amazing returns.

Whether or not you should invest in Bitconnect is not up to me and nobody can tell you what you should do with your money. But one thing to consider is that if Bitconnect does turn out to be some sort of scheme that implodes, that will probably hurt everyone’s investment whether you are in Bitconnect or not. So I believe it is important that potential investors understand what they are getting into when considering Bitconnect and make sure that you fully understand the internal workings of the company before investing your money.

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