BitConnect Explained: Is it a trading bot or a pyramid scheme?

Firstly, I am not a professional investor and this is not investment advice. Never invest more than you can afford to lose, especially in the world of crypto. I will not be held responsible for anyone's investment decisions.

Has anyone else been wondering what BitConnect is all about? The first think I thought was SCAM ALERT!!! (Maybe/probably, but we'll get to that) I decided to not stop here and explore it further. I was finding all sort of conflicting data on the forums and all over YouTube. It seems simple at first, however, understanding everything that is going on here requires a little bit of digging. I found that many people who are using BitConnect and those who promote it really have no idea how it works. Let’s discuss BitConnect Coin (BCC) and discover whether this is a scam or an intriguing investment opportunity.

For starters BitConnect Coin is a cryptocurrency just like many others out there. Some other popular examples include currencies such as Bitcoin, Ethereum, Litecoin, Dash, Aragon, EOS and Golem, just to name a few. But let's be honest, if you are reading this article, you probably already know about these, so I won’t discuss them further. The question I want to answer is, what makes BCC different? What is so called “BCC lending”? And, why does BitConnect look like a pyramid scheme with referrals and bonuses for recruiting others?

This is what immediately set off alarms in the back of my mind as well. Pyramid schemes have always seemed like scams to me as well. One example of such a scheme is the multibillion dollar company Amway. They are a company that sells household goods out of a catalog, except you can only buy the goods if you are a “partner” with the company, sort of like Costco. However, unlike Costco they have a recruitment system. If you “recruit” others to join as a partner, they can also buy the products but the person who recruited them also gets a portion of the profits from the sale of the products their recruit purchases. As you create a recruitment “pyramid” the initial recruiters end of making TONS of money as they receive small percentages of every sale from every person they recruited as well as portions of every sale from the recruits of their recruits and so on, such that the person at the top of the pyramid is making the most money of all. So basically, it’s a scam. Feel free to argue with me in the comments. In fact, The Federal Trade Commission requires Amway to label its products with the message that 54% of Amway recruits make nothing and the rest earn on average $65 a month. Sounds like a bad investment to me.

Why is BitConnect different? How can they offer such huge returns? Where is the capital coming from? It can’t come from nowhere. Somebody somewhere invested either their bitcoin or government issued currency to give BCC value. In fact, the value of BCC has increased from less than $1 in March of this year to become one of the top 20 cryptocurrencies where it sits at about $60 right now. This is my opinion now, but as I see it, the value of BCC is derived from the strength of crypto in general. The enthusiasm from the “big hitters” such as BTC and Ethereum have driven BCC up as well.
But why can BCC offer such huge daily percentage returns? They would have you believe (and it might me be true) that they have a “Bot” that trades BCC on the various cryptocurrency exchanges to make its money. Maybe, but I doubt this is all that is going on because otherwise it would be statistically IMPOSSIBLE for them to have positive returns on investment on a daily basis. I believe their bot does make gains ON AVERAGE but on the days where the bot is not trading well, I suspect the returns are coming from elsewhere. Feel free to leave a comment down below to disagree or start a discussion. Show me some more robust information about how their cryptic “bot” works and I will happily retract that statement.

Regardless, BCC does in fact pay back on average about 1% interest DAILY on your long term investment. However, the main reason they are able to do this is because the value of cryptocurrency in general has increased so rapidly. Let me give an example. Let’s say in March of this year you had $1000 worth of BCC. This would have been approximately 1000 BCC with BCC having a value of $1. If you invested your $1000 of BCC into their bot, since March you would be seeing about 0.8% daily return on your investment. Using compound interest and reinvesting all profits, you would have a USD balance of approximately $2300 worth of BCC. That is an amazing investment. However, $2300 of BCC today only equates to around 40 BCC. If INSTEAD you had held your initial investment of 1000 BCC you would not have almost $60,000 in BCC! Where did the $57,500 difference in value go? TO THE BITCONNECT BOT THAT IS HOLDING EVERYONE’S INVESTMENTS. This company made some serous capital because they only return to you the USD equivalent value of your coins on a daily basis.

While this sounds bad initially, what does it mean for investors RIGHT NOW? It means that on days when the Bitconnect bot does not do as well in the market they can supplement payouts with the ENORMOUS capital they have received from the cryptocurrency boom and from additional people buying into their investment bot. Essentially, they remove almost all of the risk of investment because they guarantee that you get back your initial investment in USD equivalent. THEY ABSORB THE HIGH RISK AND HIGH REWARD MEANING YOU DON’T HAVE TO. You just get to sit back and watch them give you money, EVEN if crypto crashes they MUST return you initial investment in EQUIVALENT USD so your money is safe in all but 2 very specific catastrophic scenarios that I will outline later.

Why does this sound too good to be true? Well, because it kind of is. If you plot out 3 year gains with 0.8% daily returns with a starting investment of $1000 and compound interest, you end up with MILLIONS of dollars in return. They DO NOT have this much capital, so there is NO WAY they can keep up their current rate of return unless the cryptocurrency boom continues indefinitely. If universal adoption takes place, anyone in cryptocurrency at all will make huge profits. We have already seen this. In reality, what I see happening eventually is lower daily return percentages that are more reasonable. However, RIGHT NOW the returns are ridiculous which means fast money for investors who are essentially capitalizing on the popularity of cryptocurrency right now.

So. What are the catastrophic scenarios I mentioned earlier? 1. All cryptocurrency crashes entirely and there is a mad rush for everyone to cash out into government issued currencies. If this happens everyone in crypto loses though and it is the less likely of the two scenarios. The other scenario is where I see the risk. Again we move into the realm of speculation here, but I wanted to be completely honest and open about explaining the WORST CASE SCENARIO about how Bitconnect functions. IF Bitconnect functions by paying the daily payouts to their investors by using the capital provided by new investors, the company is doomed to fail just like so many other crypto-investment and cloud-mining sites. If this is how they function, this is a true pyramid scheme and it WILL come crashing down at some point. This is the risk you are taking by investing in Bitconnect. I AM NOT SAYING THIS IS HOW THEY WORK. I’M JUST OUTLINING THE WORST CASE SCENARIO TO MAKE SURE PEOPLE MAKE INFORMED DECISIONS.

Is this risk worth it? For me, I decided it was, so I invested in it. Am I concerned? Certainly. However, I am no more concerned than I am about any other high risk investment that I make. The key is diversity. Did I invest all of my crypto in BCC. HELL NO. Did I invest capital that I could not live without? ABSOLUTELY NOT. However, Bitconnect has provided a RELATIVELY lower risk option that provides an opportunity to capitalize on the crazy cryptocurrency boom, and I decided to take a ride and diversify my portfolio. If it crashes, oh well. If it takes off…

Wait a minute, what was this whole illuminati pyramid scheme you mentioned? To me, this is the only disappointing thing about the company and the main thing that makes them suspect in my eyes. They offer a recruitment system much like Amway where people who recruit others to invest get a portion of kickback from those investments. If they are using this to support a scheme where they use the capital of new investors to pay the daily returns for old investors, there is a serious problem and the company WILL fail. I desperately hope this is not how it works because I want them to succeed. This is an amazing way to invest your capital in crypto and watch it grow without having to spend all of your time each day trading. Unfortunately, the risk of this possibility is one that you must absorb if you decided to invest in BCC. Ideally they are not being deceptive and they are just using this method as a way to find more investors, thereby increasing the amount of BCC their bot can trade on the open exchanges. The reason I believe it is different from AMWAY is that they guarantee you get your original investment back in equivalent USD value AND you make interest on your money DAILY. Everyone makes a return, REGARDLESS of whether they recruit others. The recruiters do make more, but this is because the only way for the bot to make higher profits for the company on a daily basis is for that bot to have more capital to trade. So in the end, even though the recruiters make more, so does everyone else who invested. You probably won’t see the 1000% returns some people were getting with cryptocurrency, in fact I can almost guarantee you won’t. But 250-300% return in about 200-300 days is worth a shot to me.

If you found my explanation helpful and are willing to take the risk of investment, please consider using my name when you sign up. Yes I will get a kickback, but I also put in a ton of work testing and researching Bitconnect as well as putting my own money on the line. Additionally I have provided a spreadsheet free of charge to calculate potential returns. Any contribution is greatly appreciated and helps me to continue to make posts like this. Don’t forget to leave comments and questions below.

-Crypt0x