The Bitconnect project is accused of being a pyramid scheme. Investors should be wary of high return promises

The much-discussed virtual currency project Bitconnect has announced the closure of its lending and exchange platform. The company was widely accused of operating a Ponzi scheme and recently received cease and desist letters from two major US states. After the company announced its intention to end trading, the price of its BCC coin plummeted from $290 to below $10 before recovering slightly. After its exchange went offline, many holders were unable to sell the large amount of abandoned assets they held.

Since the Bitconnect project came out, it has been questioned by many people, including Ethereum founder Vitalik Buterin and BitGo engineer Jameson Lopp. Less than two weeks ago, the company received an emergency cease and desist order from the Texas government.

According to an update posted by Bitconnect on its website, the company has decided to suspend its lending and exchange operations due to a series of stop-gap and DDoS attacks. Unfortunately, the blog post is currently unavailable due to the ongoing DDoS attack.

Promises high returns, accused of being a pyramid scheme

The secret weapon that enabled Bitconnect to grow to its current size was allegedly the promise of lucrative returns to investors, but the general consensus in the digital currency community is that Bitconnect’s operation was nothing more than a pyramid scheme. It is almost certain that Bitconnect’s so-called profitable “smart trading robot” does not exist.

It is not clear whether the closure of Bitconnect's reception service indicates that the company will disappear completely. Many dark web markets use DDoS attacks as an excuse before running away.

Bitconnect's Token plummeted overnight

Historically, Bitconnect’s BCC token has been very stable, and unlike Bitcoin’s growth pattern, Bitconnect’s growth has been in a steady state. But as news.Bitcoin.com pointed out in November:

“Since the majority of Bitconnect’s tokens are locked up on the company’s exchange, if its founder were to flee, millions of dollars’ worth of Bitcoin would be instantly locked up, rendering BCC worthless.”

This prophecy has now come true. According to Coinmarketcap data, the Bitconnect platform has had zero trading volume in the past 60 hours, and the locked price of its tokens is $290. On other platforms, such as Coinexchange, the price of its tokens plummeted to as low as $8, and then recovered to $25.

Coinmarketcap, which has faced a lot of criticism for displaying ads for Bitconnect, has also been criticized. In contrast, Coincodex has informed investors to stay away from the project, with CEO Marko Stokelj previously telling news.Bitcoin.com:

“Bitconnect has employed multiple questionable methods to operate and promote its business. The business model outlined by the company is financially unsustainable and the current level of returns cannot be justified by any legitimate investment system.”

While some observers in the cryptocurrency community are taking a schadenfreude at Bitconnect’s demise, it’s worth noting that many of the victims will have suffered significant losses.

Here, the editor would like to remind investors of the importance of distinguishing between legitimate cryptocurrencies and those shady projects that lure investors into participating through get-rich-quick schemes.

In recent months, many projects similar to Bitconnect have emerged, such as Ethconnect, each of which has the same opaque business model. The demise of Bitconnect will give investors a good warning.