BitConnect Was Not A Ponzi Scam
My Sympathy For Those That Lost Money
Let start this article by expressing my sympathy to individuals that put money on to the platform recently and had the unfortunate timing of the platform closing its lending services. I know BitConnect released the capital back to customers in the form of their token, and as a result of there being 1.5 million users connected to the site, the BCC token dropped in valuation by nearly 90%. Thus, the capital released back to users on the platform was also worth about 90% less.
Obviously, BitConnect came out and apologized for their releasing of all of the coins at one time and tried to make amends by reopening the exchange and giving some incentive for individuals to hold their coins by giving them a purpose. However, the value of the coin has not really bloomed much and many users are still holding coins of a lot less value.
So, I want to extend my condolences to individuals that feel wronged by the platform and are currently down a lot of money.
Why It Is NOT A Ponzi Scheme
That being said, BitConnect was not a ponzi scam/scheme and I do not blame content creators for the loss of income of those that invested. Individuals like @trevonjb and @craig-grant or Crypto Nick and Ryan Hildreth are not responsible for the closing of BitConnect and the money of the investors. The decision to invest IS the responsibility of the investor.
Cryptocurrency as a whole is a risk. We recently experienced a major market correction that may have been started on FUD articles about the China mining ban, the Korean market taxation and closings, and even US regulations. There were very solid coins that also saw staggering valuation losses in the 60-80% range. The entire market lost over 50% valuation in marketcap. Cryptocurrency is extremely volatile and many factors can cause a great deal of harm or upswing.
I bring up that point to express my feelings that any investment in crypto is a large risk. Yes, lending platforms like BitConnect pose a larger risk than simply holding Bitcoin, but I have friends that did not heed advice on when to buy Bitcoin and have lost a significant amount of money on what is considered the "staple" of our little world in this space. Our assumption as investors is that Bitcoin will recover and reach newer highs, but that is simply hope and speculation. There are zero guarantees that Bitcoin will again see $19,000USD. Thus, the risk of investment.
BitConnect created, in my opinion, one of the best business models for this space that I have seen. The reason why I do not consider it a ponzi scheme is because they were able to create a way to make enormous amounts of money on both ends of their business model. I will admit that their referral program tends to resemble a pyramid scheme based on payout structure, but so do many other referral programs. The affiliate marketers will find ways to produce an income from investors when a program like that is offered, however, that does not discount the entire BitConnect system.
The platform was around for a minimum of one year (I think I remember reading or hearing that it may have been 16 months). In that time, the BCC token went from pennies to nearly $500 at some point and Bitcoin went from around $1000 or less to nearly $19,000 at some point in December. So, even without a volatility bot the company would have made tremendous amounts of money based solely on those two coins. The caveat being that they pay out in USD and NOT the Bitcoin used to buy into the platform. The number that is associated with the wealth created by this platform and business model is and should be staggering. We are talking about BILLIONS of dollars.
Now, did they have a trading bot? Maybe? I do not see it as inconceivable for them to have a volatility bot. Hell, I know 4 or 5 people that have coded bots and use them for trading and they produce really good returns. I am not sure why they would not reveal the bot or give proof, but I also do not see it as out of the realms of possibility.
The only reason I feel like BitConnect would eventually close if it did not have a volatility bot is if the model became unsustainable due to reinvestments with compound interest. Over the course of time the amount of money being generated daily would exceed the amount of profit from the coin simply rising. The platform would not be able to sustain 100,000 users making $100,000 a day without any reinvestments. It is just not feasible.
In Closing
Anyways, I just wanted to give my two cents. I do think there is some accountability that should take place on both sides of the coin. Content creators do have a responsibility to not lead individuals wrongfully, but at the same time individuals should still be accountable for their own actions and investments. This is true for real-estate, stocks, crypto, and any other form of investing. Do not overextend or risk what you cannot afford to lose. Especially, in a ridiculously volatile market like crypto.
The closing of BitConnect is attributed to a lot of factors that are probably not linked to the ones given on their web page, but it is not the fault of the aforementioned Youtubers. They are not to blame for your loss of money.
My advice moving forward is to research into your investments thoroughly, assess your risk tolerance, continue to diversify your portfolio and limit your percentages in high risk platforms, and keep your emotions in check. If you are worried about the amount of money you have in a singular investment, then you have overextended yourself and need to adjust the amount at risk. Also, take ownership for your own actions and do not blame others for a choice you have made. Yes, losing money is one of the worst things that can happen in a world that is built on that very concept, but think of all the opportunities cryptocurrency brings with blockchain technology and financial freedom from centralized banks and government institutions.
Okay, end rant.
You did not give any reason why BCC was no ponzi scheme. In actual fact you say yourself it would have only worked if it was a ponzi scheme
So you personally think that new investors have to invest in order to pay the older investors. That is a ponzi scheme by definition. And I don´t understand why you think losses on other coins make BCC not a ponzi scheme. Other coins are not responsible for the scammy nature of BCC lending.
However I agree that people are responsible for their own investments and that you cannot blame cryptonick and all the other retards alone for this mess. You shouldn´t turn turn them loose though. For they are the people who got their profits from the people whom they dragged into BCC lately. if you think cryptonick etc have never payed out profits you are naive. The money they have on their fiat account or in other coins right now is to a significant part money that belonged to their viewers/followers. This is enough reason to be angry at these guys.
btw a professional corporation will never use pyramid scheme affiliates
I gave multiple reasons as to why this was not a ponzi scheme. i do not believe the company ran based on new investors paying old investors. I explained that their control of their coin was one way they made really good profit. Also, the crazy increase of Bitcoin given to the platform for the exchange of a fiat payout gave the company a drastic profit of massive proportion from the time of their opening. These two features alone would have generated the company BILLIONS of dollars.
Lastly, I covered the possibility of a trading bot and how I know individuals that personally use them to make really good returns on the crypto market. Cryptocurrency as a whole is extremely volatile and if you had decent programmers at the helm, then I do not see any reason they could not make decent profits utilizing one.
Well, losing money and being a "victim" in a ponzi scheme are not the same thing. Of course, everybody investing somewhere should understand the risk. But with your argumentation, there is nothing like a ponzi scheme because of exactly that - they should understand it first.
Obviously, presenting guarantees for a certain ROI indeed are a strong indicator for a ponzi scheme, and this is exactly what has been done here. Nobody from the Bitcoin core team has ever promised any kind of return, and that is the difference.
People now losing money because the system itself wasn't sustainable and had to shut down again is a strong sign for BitConnect being a ponzi scheme.
I do not believe there was a guarantee on the percentage of gains. I do believe the average was about 1% return, but this could have also been 2% or 0%. How is this different from a bank offering 1% return on your savings account? The principle is the same, but in the case of a volatile market extra gains are/were possible.
The reason why the system would end up failing is because of the reinvesting for compound interest. However, I do not believe it would ever get to that point in any reasonable amount of time. The amount of money it would take for 100,000 users to reach $100,000 of daily payout is insane. Plus, the discipline to not pay yourself to get to that level seems extremely unlikely.
The traditional ponzi scheme and definition is new investors pay old investors. In the case of BitConnect their business model was paid on the increasing price of the Bitcoin used to purchase their token and then the price increase of their token when lended to the company. Since the company controlled the majority of tokens and could inflate the price of their token, and then return investors a much reduced amount of tokens back after capital release, I would argue that new investors did not pay old investors. Furthermore, this business model would be able to continue indefinitely making the business and investors profit if it eliminates the ability to reinvest after a certain amount of money.
I know this stance is not normal and many people will shout that it is a ponzi scheme, but I think they are wrong. You could maybe argue that this is a different version of some business model that could create some FUD that it is a scam, but it is definitely not a ponzi scheme.
very well said i just posted something along the same line. im just tired of people blaming trevon, nick, ryan and others like them people need to take responsibility for there actions
I can understand people being upset at losing money. However, I just do not think it is right to blame other people for decisions you had made with your money. People have the ability to think for themselves and should always do so when considering an investment.
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"I will admit that their referral program tends to resemble a pyramid scheme" which was why it was unsustainable and had to eventually fail.
They made changes to their referral program to mitigate the proportion of daily returns. If they removed the referral program altogether, then the company would still make money based on their business model. So, I stand by my hypothesis that BitConnect was not a ponzi scheme.
What a fine can of worms you opened lol
Can sustain itself w/o reinvestment, a classic ponzi. Well said.