Hello Steemians,

Many of you are likely aware of Bitconnect. It is a high yield investment program (HYIP) that guarantees high daily returns that can be compounded by reinvesting back into the lending platform. It has tiers of rewards, which allow you to receive your principal back sooner and have a higher daily return.

It offers generous referral fees so that more people can join the platform. As a result, there are more and more paid advertisements for the platform. If you invested $10,010 today, you'd have nearly a trillion in five years. Even if you didn't assume compound interest, your minimum return is still 91.25% and can go as high as 365%. That's zero reinvestment. It's marketed the same way other passive income schemes are, and has incited the passions of many people who view the platform as a way to change their lives. In the end, it will certainly change many lives and there will be winners and losers. While this is true of all markets, this particular one, as with any Ponzi scheme, will be built off of climbing on the backs of others. Invest in almost any other cryptocurrency (no, not Regalcoin).

FAQ

Having posted the YouTube video a few hours ago, I've gotten a number of comments that I'd like to address here. Here's the responses to a number of comments I am getting:

Q:

If returns are enough to claim an asset is a Ponzi, then isn't Bitcoin a Ponzi by that logic?

A:
No. Bitcoin has achieved its return through pure speculation, both in the future utility value of the network via adoption and adoption by investors (both retail and institutional). Granted, some of that comes from the Greater Fool theory which you can argue is akin to a Ponzi Scheme. Yet, this is true of all markets so really is not a quality unique to Bitcoin (e.g: see growth stocks). It is a part of market behavior.

Bitconnect, on the other hand, has multiple qualities that only Ponzi Schemes have. It promises returns, and even provides a minimum guarantee that increases with higher initial investments. The idea of having tiers for investing is a common characteristic of traditional pyramid schemes. It uses multi-level marketing to draw more individuals to the platform with handsome referral fees. It lures you into a false sense of security with the idea that algorithmic trading can provide these level of returns if enough research goes into it. Think about why so many people have to make videos on why Bitconnect isn't a scam and you'll start to understand the difference better.

Q:

So & so makes 4% a day. I was able to make 20% yesterday in crypto. If you held Bitcoin since 2009, $100 would be worth well over $100m. Binary options make tons. Many ForEx traders make 1% a day easily. Scalpers and swing traders in stocks make a killing. Arbitrage is a riskless way to make money frequently. What's so unrealistic about 1% a day?

A:
Every example that is cited to me usually has one of five problems:

• The assumption that a single good day can be extrapolated into more good days (e.g: I made 20% yesterday, swing trading, transaction costs)
• It isn't an investment, but rather a gamble (e.g: Binary options, very high leveraged trading such as with ForEx which allows for x50 and higher leverage)
• It isn't scalable (arbitrage)
• It has heavy transaction costs (scalping)
• It's an outright lie (my friend makes 4% a day)

Yes, high returns are plausible in any time frame. In the end, it is the promise of them which is the problem. Over an extended period of time, returns tend to revert to mean. Of the top 25% actively managed mutual funds in September 2014, only 3% were able to remain in the top 25% just two years later in September 2016 (SPIVA Persistence Card). Yet Bitconnect assures you of returns that will far exceed what you could get in any other asset class and those returns are "safer" than other cryptocurrencies because they are paid out daily. Realistically, most just simply cannot time the market forever no matter how good the blackbox is. One of the best hedge funds in existence, Renaissance's Medallion Fund, comes no where close to Bitconnect's "average" returns:

The fact Bitconnect invests in cryptocurrencies doesn't magically change the story. There are plenty of hedge funds involved in cryptocurrencies as well which pay handsome salaries to figure this out. Just think about it and be realistic.

Q:

It's already worth $1.4 billion. How can you say it is a Ponzi when it has proven itself through its market cap?

A:
Bernie Madoff was able to create a $65 billion Ponzi scheme. Size means nothing ... Here at least.

Q:

I invested and have already made my principal back several times over. How can you call it a Ponzi and too good to be true when it is paying out actual profits?

A:
That's how Ponzi's work. They work until they don't. I know someone who had invested his fortune with Madoff (was not affiliated with the actual fraud). He retired early and had some great years. Then it all came down and so did his life. Naturally had he cashed out, he would have been made very wealthy and gotten to keep it following the falling out. But just because you've cashed out and made profit doesn't make it legitimate. All it means is that you were an early investor and you didn't get too greedy.

Q:

People can do whatever they want with their money - why do you care what they do? Why care about people who recommend Bitconnect? How does it affect you?

A:
First of all, given it is an outright scam, the wealth that is being generated by those who are successful will be built off the back of others who lose everything when it falls apart. Granted, the people who lose their money are greedy and deserve it to some extent. That still doesn't justify the behavior, even if it will act as an important lesson to all who take part in it (e.g: Control Finance). Some people will jump from HYIP to HYIP and I get that. I don't mind that if you don't refer it to others. But otherwise it is ethically questionable, and the actions of cryptocurrencies like this will affect others when it inevitably falls. The extent of the damages cannot be estimated at this point. It really depends on whether or not governments intervene following the falling out. We will see.

Hope you all enjoy the video and my thoughts here. As usual, always happy to engage. Happy investing (except in Bitconnect)!