Adapted from a blog post I've written here.
I wouldn't blame you, even after doing some of your own research, if you have no idea what BitConnect is. In this post, I'm going to delve in and provide some clarity about what BitConnect is all about (as impartially as possible). I'll then outline afterwards why I have not invested anything into the BitConnect platform (which isn't impartial, at all).
Before I begin, remember that I'm not a financial advisor. Read my full disclaimer here.
BitConnect (BCC) is a cryptocurrency which launched on 15th November 2016 which is owned and operated by Ken Fitzsimmons in the UK. This is likely someone who just stands in, providing anonymity, for the real people behind the company. Recently (September 2017) other company entities have appeared in UK company records.It has the 12th largest market capitalisation of all cryptocurrencies which are currently available, standing at $938,943,132 ($136.22 per coin) at the time of writing.
If you cut through the bullshit, BitConnect is all about lending your money out to a trading bot which takes advantage of Bitcoin's volatility to generate returns of between 0.5% and 1% daily (which compounds!) on most days - although it does vary. You can find the published daily interest it accrues here. To put this in perspective, if you invested $1010 in BitConnect and had a 0.99% (including the .1% bonus) daily interest rate, you'd have a return of 236.61% - which equates to £2389.76 in profit - once your lock-in period ended. Holy fuck. Who wouldn't be drawn in by that?
The roadmap (which ends in November 2017) can be found here. In October (this month), we should expect the smart card and music video album (what?) launch.There's no Reddit community (/r/bitconnect is something completely different). They have a Twitter feed here, but they don't seem to use it to engage with the community - just for putting out general cryptocurrency news.
Despite opening an account to understand the BitConnect platform more, I've invested absolutely nothing into it. Why? In my opinion, there are red flags everywhere which are screaming to stay away. Things such as:
I'm not alone in seeing these red flags. Some well-known and decent YouTubers who publish videos regarding cryptocurrency have expressed their concerns too. I've summarised their main points (and linked to the videos) at the bottom of this post. In any case, I'll go through three of these points in a little more detail.
A recurrent concern across the YouTube videos linked below is that no proof that this trading bot actually exists has been published. Some limited amount of trade history (showing buy and sell orders) would be enough to dismiss a lot of this scepticism. The closest thing I could find - but isn't good enough - is the 'Lending Profit Chart' accessible on the BitConnect homepage or here. While this shows the returns generated by the trading bot each day, it doesn't prove that it's actually doing it.Ask yourself: why wouldn't you release a limited amount of trading data? If they published such data, it would be fantastic marketing and stop all the naysayers in their tracks. What reason could they have for not publishing it?
Depending on how much you invest, your funds are tied up for between 120 to 299 days. So anything you earn, before this period ends, is only a paper (i.e., unrealized) gain. By itself, a lock-in period is not my concern. Instead, it's that your investment is locked up for at least 120 days (and that's only if you invest $10,010 or more).Consider this:
Some possible answers to these queries might be:
Check out the picture on their website here.What does that look like to you? How strange and coincidental!
Anyway, whenever someone uses a referral link which you've provided them, you earn 7% of whatever they lend to BitConnect. And if those people refer someone who then lends on the platform, you earn commission through them (but slightly less). This goes on and on (as you can see above). You can find more information on their FAQ page (under 'lending' on this page) if you want to dig in more.
Affiliate programs, by themselves, aren't a bad thing. They incentivise existing users to spread information about products/services and can be a cheap and effective customer acquisition method. PayPal had a long-running and successful affiliate program to increase new user uptake. Coinbase currently an affiliate program too.
However, the model employed by BitConnect is lucrative enough that it could be encouraging negative behaviour. For instance:
In short, ask yourself this: what behaviour does this program encourage? Where do the motivations of recommendations lie? Is that a good?
No doubt some people have made, and will continue to make, a lot of money through BitConnect. However, it's false to imply that the success of the platform until now absolves it of its design and lack of transparency. Just because someone else has cashed out of this platform successfully, does not mean it isn't a scheme. In the Boxmining video, he says that "you can't prove it's a pyramid scheme until it falls apart". In other words, this could be successful for some time to come and we won't be able to prove that it is a scam until it bursts into flames. However, while we can't prove this is a scheme, we can point to some worrying signs in the platform's design that suggests it is.
Perhaps BitConnect is set up to work something like this:
In essence, as long as this system can continue to subsidise pay-outs to existing users through increased adoption, there's no reason that BitConnect would fall apart. However, if either (or a combination of):
Then it would blow up - very quickly.
Before that happens though, you might be able to make a lot of money. But the reality of how you are making money through BitConnect is probably different than is advertised.
I'm not a financial advisor and I don't pretend to be. I've laid out the facts and my outstanding concerns regarding BitConnect. Personally, I am investing nothing into this and will not be recommending anyone to do so. Unless you know something I don't (and if you do, please share!), I would recommend you stay away too.
I like cryptocurrency and the blockchain. BitConnect's presence in the top 15 (by market capitalisation) of all cryptocurrencies is worrying, as this lends it credibility - where, as I hope I've somewhat shown - it doesn't deserve. I didn't really want to write a negative review, as I would have rather focused my efforts elsewhere. However, all the positive reviews of BitConnect motivated me to add my voice to the naysayers and maybe get other people asking the same questions I have.
Review by DataDash. Makes observations that:
Review by BoxMining. Makes observations that:
David Hay starts his review of BitConnect by offering a $1000 bounty to anyone that can prove that the trading bot is doing what it says its doing. Makes observations that:
