On the 16th January 2018, BitConnect announced that they were shutting down the lending platform and closing the exchange platform on 21st January 2018. In this post, I delve into what happened, why it happened, and the aftermath.
If you don't know what BitConnect is, check out this previous post I wrote back in October 2017. If you'd prefer to watch a video, check out this 40-minute upload by Doug Polk.
Active loans were cancelled, with all funds (principal and interest) automatically converted to BitConnect coin at the rate of $363.62 per coin (15-day average). Following this news, BitConnect's coin price nosedived from $255.91 all the way down to $19.28 (close) on the 16th January 2018 (a 87% drop). At the time of writing this on the 19th January 2018, it sits at $32.34.
To paraphrase their announcement, they cited three reasons for closing the lending platform:
None of these reasons should substantiate closing their platform:
So why did BitConnect really collapse? In my original post about BitConnect, I suspected that it was setup like this:
If no trading bot exists, then such a system can only sustain itself while there is enough adoption from new users to pay-out existing users (and, of course, take a cut themselves). Therefore, if either (or a combination of):
Then it would collapse.
We'll probably never be able to verify whether it was setup in this way, but it seems highly probable.
Let's ask a different question first: what might this look like if it WASN'T an exit scam?
If it looked like this, then users wouldn't be losing out as they'd have possession of a BTC - a cryptocurrency which is not tied to the success of BitConnect.Instead, this is what happened:
Because the value of BCC is tied to the success of their lending platform, users wanted to exchange it immediately for BTC - because BCC was rendered worthless. However, there were few (if any) people looking to buy BCC. Subsequently, we saw the price tumble about 87%. To put this in perspective, a user who was returned $1000 worth of BCC would only have been able to exchange their BCC for about $130 of BTC. With even a little bit of foresight, it should have been clear to the people behind BitConnect that this would happen. So why didn't they just credit users with BTC?
Yeah, this looks like an exit scam to me. You didn't get that BTC because the founders have run off with it.
Sometime after BitConnect's announcement, /r/BitConnect temporarily went private. It has since been made public again, but submissions are restricted. As a Reddit user points out here, the majority of posts are just others "punting" others while they're down. Unsurprisingly, one of the top threads is a suicide hotline number. There's another subreddit over at /r/BCC which is serving as a forum for those impacted by BitConnect's exit, but it's just more of the same.
Most people who ever promoted BitConnect are now distancing themselves from it by taking down BitConnect-related videos, disappearing, or pivoting to promote some other scam coin.
BitConnect released an update on the 17th January 2018 where they extended a poisoned olive branch to the people they'd fucked over. For the next 10 days, they're allowing you to participate in the "BitConnect X" ICO at a rate of $150 per BCC (if you're outside the USA). While this represents a premium over the current market price, it's probably just another scam to compound the benefit of their first exit.
A number of BitConnect copycats are still floating around. I've previously compiled a small list here, but it's out of date now. There's a better (depressingly long) list compiled by a Reddit user here of projects you should avoid. If you check out this comment, there's also a list of YouTubers who have previously, or continue to, advocate suspected scams.
Some of these douchebags, such as Trevon James, are continuing to promote BCC and other suspected scams. Somehow Trevon James still has over 100,000 subscribers despite voicing that he was holding onto BCC because it was a limited supply coin, a currency, and "no different than Litecoin (LTC)".
I'm honestly shocked that these promoters haven't gone underground: lots of people lost lots of money - to the benefit of the promoters. Haven't they considered the life-threatening implications of that yet? Are they that dim?
So is it over? No, the fight continues - and will probably never end.
I didn’t doubt that BitConnect was a scam, but a part of me hoped I was wrong. The impact that this has had on people's lives could be financially devastating. This is what a scam blowing up looks - and it isn't something I have enjoyed reading about or dwelling on. Lots of people have got burned to the benefit of only a few: BitConnect and their small platoon of YouTube promoters. There will probably be no recourse for those who lost the majority of their funds either. My sympathies are with those impacted :(
Originally published here.
