How much of Bitcoin’s rise is Caused the BitConnect Ponzi? By my estimates 7% and growing.
I have already explained by thoughts on BitConnect. I have done my own research and believe it is a Ponzi scheme and set to collapse. I will admit that I have been fascinated by the drama around BitConnect sort of like watching a high speed chase on TV. You know there is going to be a wreck, you just don’t know when.
https://steemit.com/money/@cryptick/bitconnect-the-billion-dollar-pump-and-dump-part-6
How much of Bitcoins rise is caused by Bitconnect? With very limited information, it may be hard to know; but lets take a crack at it.
Prices are determined by Supply and Demand. When demand surpasses supply, prices rise. Or when there is not enough of a good prices rise. In Bitcoin’s case it is easy to measure supply because a block is mined every 10 minutes. That means there are 144 blocks a day. That means there are 1800 bitcoins at day. Valued at $4,000 a coin that is 7.2 millions of bitcoin each day.
Note: I know bitcoin is currently valued at 7,000+ a coin, but I am about to combine this with older data so let’s stick with this conservative number.
Now we know that bitcoin price is rising, and rising substantially so we know there is significantly more demand than supply.
How many people are in BitConnect?
Well this is a tough question. According to one source
https://chainz.cryptoid.info/bcc/#!rich
There are 12,561 accounts.
At $2,500 each (stay tuned for where that comes from) that is $31 million in total size.
While I have used this number a lot, I have my doubts about how reliable it is. In fact I have my doubts about high reliable all numbers from BitConnect are.
The other information I know is that two of the big BitConnect Promoters claim to have made a bunch of money.
Treyvon James
And CryptoNick
Now the other day I made some interesting observations on CrytpoNick’s numbers.
His you tube video shows 12.4 million in loans with 4,933 people and his earnings are now $400,000.
This is a very large sample and we can get some numbers. If we look at the total loan volume and divide it by the people we can see how much each one is invested for. That gives us $2,500 for an average loan amount.
Now I do not know if CyptoNick is under Trayvon. Let’s assume they are separate. If CryptoNick makes 400,000 with 4,933 people then Treyvon has 1,000,000 in earnings he should have 12,332 underneath him. Trayvon’s (downline's) volume should be in the 31 million dollar of loans area.
That means with just the two of the top US people we represent 17,000 people and 33 million in loans.
Now I do not know how much of the organization this represents. My gut is telling me there are a lot of other people in a lot of other countries. I do recall there being a video online about a Vietnamese woman who also earned a million dollars in BitConnect, but lets just just take a conservative guess and say this represents half of the organization. That would mean there are about 34,000 people and $66 million involved.
So one estimate gives me 31 million the other estimate gives me 66 million. Let’s just split this and call it a nice even $50 million. Hey, they are all estimates. (And when it grows at 1% a day it won't be accurate for long!)
In order for a Ponzi Scheme to continue, it needs to grow. Basically, the scheme pays out 1% a day, and if it is paying out 1% a day it needs to grow 1% a day. (Some may take a lower number here of 0.6% a day, but I like simple math.)
If the scheme has $50 million dollars in it, it needs to attract $500,000 of new investment each day.
OK lets go back to the supply of bitcoin. Each day there is 7.2 million dollars of Bitcoin mined.
That means that BitConnect could be sucking up 7% (500,0000/7,200,000) of the total supply of all new bitcoins (every day over the last 4 to six months). Now I know Bitcoin is priced at $7,300 a coin, but as the rest of these numbers –particularly “BitConnect volume number” are over the last 6 months the $4,000 number is much closer to a six month average. We can easily adjust to a higher current price we can just cut our results in half. At $8,000 a coin it would be taking up 3.5% of all new coins.
Either way, BitConnect is potentially a very substantial single reason for the high prices of Bitcoin.
Now if that does not have your attention let’s just assume this Ponzi scheme continues for 6 more months. Look at this chart.
In 6 months BitConnect will have $300 million invested and be sucking up $3 million dollars of new Bitcoins every day. That currently represents about half (at the $4,000) price of bitcoin mined or one quarter (at $8,000) of all new Bitcoins. I don’t know what price Bitcoin will be in 6 months, but it could of course be higher.
Could this make Bitcoin and BitConnect a self-fulfilling prophecy?
Maybe.
Now I make a lot of assumptions in the post. I think they are well-reasoned open and logical. I have had some great discussions with other people who think my numbers were too low. I do respect their opinions. I really wish I had better data, or more ways to check these numbers. If you have some methods or ideas, be sure to share in the comments below. I would even love to get several gut guesses.
Now there are a few other factors that we might want to consider? Is BitConnect holding their earnings in Bitcoin? I am assuming they are. As a fraudster who might need to skip out of town quickly, bitcoin represents an easy way to hide and take your wealth. If they are converting this wealth into US dollars, it really would not matter so much what percentage of bitcoin’s daily mining they buy because it would all be sold again. Given that they are smart, I would say they likely do a little of each maybe holding half in bitcoin, a quarter in US dollars and a quarter in cars, gold, houses, and dong (the currency of Vietnam where some of the early members live.)
We also are assuming the magically BitConnect bitcoin trading bot is not real. Now if it is real, how it could make those kinds of daily earnings, would be real interesting. That would be a different article though.
If BitConnect is a Ponzi Scheme; it will fail. When it does it could have a negative effect temporarily on Bitcoin; like previous major events. At the same time, if it is a Ponzi Scheme it could keep upward pressure on Bitcoin for a long time. It seems as if BitConnect has a cult like following.
There are some other scenarios that are worth mentioning. Currently, when you buy BitConnect you do a two part switch. First you buy Bitcoin, then you trade the bitcoin for BitConnect Coins. This is extremely complicated, so I haven’t spent much time on it. However the company has artificially limited the supply of BitConnect coins. When you start a loan you might buy 10 BitConnect coins, but then when you end the loan; they will give you back 1 coin, (because the loans are paid in dollar value of the coin, not the number of the coins and the price went up so much); if BitConnect gets big enough, it could do that with the BitCoins. And if they are smart enough to hold a significant portion of their money in Bitcoins, with buying powers now at 7% of production, this is not an impossible scenario. BitConnect could get so big it takes down Bitcoin!
Hey, these are some thoughts I have on the numbers. They are my best guesses, please share your thoughts with me.
What do you think the numbers should be?