Bitconnect, the lending and exchange platform that was long suspected by several people within the crypto community of being a Ponzi scheme, has declared it’s closing down.
In a release on its web site the platform said the closure is attributed to “continuous unhealthy press” surrounding the platform, 2 cease and desist letters from each Texas and North Carolina’s securities boards, and continuous DDoS attacks on the platform.
While the platform says they’re refunding all outstanding loans at a rate of $363.62 USD (an average of the token’s value over the last 15 days), the Bitconnect token is presently trading down 80th and value less than $40, therefore while users might have been made whole on a BCC-equivlent, several are actually suffering severe financial losses in terms of USD or Bitcoin (which is how they made their original investment).
Many within the cryptocurrency community have brazenly accused Bitconnnect of running a Ponzi scheme, as well as Ethereum founder Vitalik Buterin.
The platform was powered by a token known as BCC (not to be confused with BCH, or Bitcoin Cash), which is actually useless currently that the trading platform has close up. Within the last few hours, the token has plummeted more than 80th to about $37, down from over $200 just a couple of hours ago.
If you aren’t acquainted with the platform, Bitconnect was an anonymously-run web site where users may loan their cryptocurrency to the company in exchange for outsize returns depending on how long the loan was for. For instance, a $10,000 loan for 180 days would supposedly provide you with 400th returns monthly, with a .20% daily bonus.
Bitconnect additionally had a thriving multi-level referral feature that also made it somewhat similar to a pyramid scheme with thousands of social media users attempting to drive signups using their referral code.
The platform said it generated returns for users using Bitconnnect’s trading bot and “volatility trading software” that typically averaged around 125th per day.
Of course profiting from market fluctuations and volatility is a legitimate trading strategy, and one utilized by several hedge funds and institutional traders. however Bitconnect’s promise (and payment) of outsize and guaranteed returns led many to believe it absolutely was a ponzi scheme that was paying out existing loan interest with new pledged loans.
All Bitconnect loans were denominated in U.S dollars however had to be made in BCC, the platform’s native cryptocurrency. thus in order to make a loan users would need to deposit bitcoin into the platform then exchange it for BCC at regardless of how market rate was. And loan interest and principal was also solely paid out only in BCC, which means users would need to convert it back to bitcoin (and then if desired, USD) once the loan term was finished.
The requirement of getting BCC to participate in the lending program led to a natural spike in demand (and price) of BCC. In less than a year the currency went from being value less than a dollar (with a market cap in the millions) to an all-time high of $430.00 with a market cap higher than $2.6B.
But currently with no alternative uses for the token, it’s possible that the value will continue to plummet. The company did say that the ICO for his or her Bitconnect X trading platform can still happen, and that trading for the BCC token will continue there.
See the official communication disclosed by Bitconnect team: