Recently, an altcoin known as BitConnect has been one of the fastest growers in the crypto space. With banner ads on popular websites such as Coinmarketcap and video ads on Youtube, many people have heard of Bitconnect but do not know what it does. I will explain what BitConnect is, where you can buy it, and ultimately why you should NOT put your money into it.
What is BitConnect?
According to the BitConnect official website, investing money into it can provide "income stability" by paying out daily interest to anyone who "loans" money to their official exchange. In order to loan money into the exchange, you first must deposit Bitcoin and buy the BitConnect coin. You subsequently lend BCC to their exchange and earn a variable daily interest until you are able to withdraw your earnings a few months later.
This is the amount of accrued interest you will be earning, depending on how much money you "loan" to the exchange. Up to 40% a month sounds pretty great, in fact, it sounds too great. If you loan $1,000 to the exchange and get the maximum interest per month, you will have $56,000 by the end of the year because of the wonders of compound interest. If this doesn't ring any alarm bells, look at the words below the table. This website is filled with grammatical errors. For an organization that is worth millions, they should be able to fix basic errors like this. The fact that you aren't allowed to withdraw any money for almost a year is also pretty shady. Notice how the table says UP TO 40% interest per month; now I will go through how their laughable system for interest payments work.
BitConnect determines its daily interest payouts from volatility "software"
According to their website, the more volatile BTC is, the larger interest payouts you receive. I can't prove this, but I have a feeling BitConnect pays people interest depending on the amount of new money that is added every day. If you can't tell already, this whole operation seems like a giant multimillion dollar ponzi scheme. If you are able to withdraw your money from the exchange, BitConnect encourages you to keep your money in the exchange and "reinvest it". There is also a very generous referral program, which is something that all ponzi schemes seem to use.
If you can read through the terrible grammar, the affiliate program is designed to reward the people on the top more than on the bottom similar to a pyramid. I also highlighted something that strikes me as extremely shady; They have the right to adjust or disable the commission rates "to ensure the continued operations of the BitConnect service". So if the exchange starts to become insolvent, they can either make the referral rates high to attract new money, or cancel them if they don't want to pay the top of the pyramid as much money. There was a website that was extremely similar to BitConnect called Altcoiner. They had the same "guaranteed interest payouts" that seemed too good to be true. Instead of Volatility Software they used "arbitrage" to generate their unreal returns. They claimed to be from Singapore but it turned out they were from Nepal. A month or so after everyone called this website a scam, it was all of the sudden inaccessible. This could be the fate of BitConnect, but since it is so famous I doubt it will go down quietly.
The moral of the story is if it sounds too good to be true, it's not true. Up to 40% interest per month is impossible for a lending program to achieve. Their constant search for new users screams pyramid scheme, and you should never put your money into a program like this. It is unfortunate because giant websites inadvertently endorse this project for its users by displaying ads. This makes BitConnect seem much more reputable to the ignorant investor. The Cryptocurrency market is known for its easy money as well, which means that 40% a month interest does not sound insane. People can double their money in a day, so this means that ponzi schemes like this are much more likely to succeed in the crypto market. Do not invest in anything that has guaranteed returns. We cannot let these scams keep plaguing our community and further the narrative that Bitcoin is used to malicious activity.
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