Bitconnect, the lending and trade platform that was lengthy suspected by many within the crypto neighborhood of being a Ponzi scheme, has introduced it’s shutting down.
In a launch on its web site the platform stated the shutdown is attributed to “steady dangerous press” surrounding the platform, two stop and desist letters from each Texas and North Carolina’s securities boards, and steady DDoS assaults on the platform.
Whereas the platform says they’re refunding all excellent loans at a charge of $363.62 USD (a median of the token’s worth during the last 15 days), the Bitconnect token is presently buying and selling down ~80% and value lower than $40, so whereas customers could have been made entire on a BCC-equivlent, many are actually struggling extreme monetary losses by way of USD or Bitcoin (which is how they made their authentic funding).
Many within the cryptocurrency neighborhood have brazenly accused Bitconnnect of working a Ponzi scheme, together with Ethereum founder Vitalik Buterin.
The platform was powered by a token referred to as BCC (to not be confused with BCH, or Bitcoin Money), which is basically ineffective now that the buying and selling platform has shut down. Within the final The token has plummeted greater than 80% to about $37, down from over $200 only a few hours in the past.
For those who aren’t acquainted with the platform, Bitconnect was an anonymously-run web site the place customers may mortgage their cryptocurrency to the corporate in trade for outsized returns relying on how lengthy the mortgage was for. For instance, a $10,000 mortgage for 180 days would purportedly provide you with ~40% returns every month, with a .20% every day bonus.
Bitconnect additionally had a thriving multi-level referral function, which additionally made it considerably akin to a pyramid scheme with 1000’s of social media customers making an attempt to drive signups utilizing their referral code.
The platform stated it generated returns for customers utilizing Bitconnnect’s buying and selling bot and “volatility buying and selling software program”, which normally averaged round 1% per day.
After all benefiting from market fluctuations and volatility is a official buying and selling technique, and one utilized by many hedge funds and institutional merchants. However Bitconnect’s promise (and cost) of outsized and assured returns led many to imagine it was a ponzi scheme that was paying out present mortgage curiosity with newly pledged loans.
Beneath is the chart that may decide how a lot customers would make the utilizing the platform.
All Bitconnect loans have been denominated in U.S however needed to be made in BCC, the platform’s native cryptocurrency. So in an effort to make a mortgage customers must deposit bitcoin into the platform then trade it for BCC at regardless of the market charge was. And mortgage curiosity and principal was additionally solely paid out solely in BCC, that means customers must convert it again to bitcoin (after which if desired, USD) after the mortgage time period was completed.
The requirement of getting BCC to take part within the lending program led to a pure spike in demand (and worth) of BCC. In lower than a yr the forex went from being price lower than a greenback (with a market cap within the tens of millions) to a all-time excessive of ~$430.00 with a market cap above $2.6B.
However now with no different makes use of for the token, it’s probably that the value will proceed to plummet. The corporate did say that the ICO for his or her Bitconnect X buying and selling platform will nonetheless occur, and that buying and selling for the BCC token will proceed there.
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