After launching in early 2017, Bitcoin investment lending platform BitConnect became the largest scam in cryptocurrency ever. Here’s how it pulled it off.
In a menacing turn of events yesterday, Bitcoin investment lending platform BitConnect abruptly announced it is shutting down its lending and exchange services. But while this sudden “curveball” might have come as a massive surprise for thousands of gullible investors, the writing was on the wall all along.
The company, which made its foray into the cryptocurrency scene with an initial coin offering (ICO) in late December 2016, swiftly cemented its position as one of 2017’s best performing currencies on CoinMarketCap. Indeed, during its heyday, BitConnect boasted a market cap of over $2.6 billion and a value exceeding the $400 mark.
But despite its meteoric growth and burgeoning user base, the investment platform attracted a swarm of naysayers with its suspicious business model, which vocal critics repeatedly labeled a Ponzi scheme.
Guaranteed to earn investors up to 40 percent total return per month, BitConnect followed a four-tier investment system based on the sum of initial deposit – the more cash you put down, the bigger and faster profits you could rake in.
Regardless of the stake though, investors were promised a one-percent return of investment (ROI) on a daily basis. To this end, the company had developed its own proprietary “trading bot and volatility software” that would turn your Bitcoin investment into a fortune. Or so the information provided on the website suggested.
This meant that salting $1,000 away into your BitConnect investment account could net you more than $50 million within three years, assuming the scheme does indeed live up to its promise for one-percent interest compounded on a daily basis. Needless to say though, many deemed this model unsustainable.
Among the first ones to voice his concern with the company was Ethereum founder Vitalik Buterin. “If [one percent per day] is what they offer,” he said on Twitter back in November, “then that’s a [P]onzi [scheme].”
Despite these warnings, BitConnect continued to pick up momentum.
Indeed, the company relied on an aggressive marketing strategy on all fronts. Putting aside its extensive digital and event marketing efforts, the company had enlisted a large army of multi-level affiliate marketers to recruit new investors, who could then work their way up by bringing in even more new investors – and so on and so on. In the real world, we call this a pyramid scheme.