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Bitconnect is a MLM For Crypto, That is Clear… But is Bitconnect a Scam?

The internet is buzzing with two ideas 1. Bitconnect is a great opportunity and 2. Bitconnect is a scam. Is Bitconnect a good deal, is it a scam, is it both?[1][2]

We can’t answer those questions with certainty, and neither can anyone else.

After-all, to know if it’s a good deal for you or anyone else, I’d have to be able to see the future.

UPDATE: Hopefully some of you listened to the words of caution on this page (where we took a balanced view, but cautioned that Bitconnect had all the markings of a traditional Ponzi). It turned out that Bitconnect did essentially what we had feared, when Bitcoin entered a deep correction in January 2018, Bitconnect closed down their lending service and on-site exchange and kept everyone’s Bitcoin. Luckily, they refunded people in Bitconnect tokens. Unluckily, Bitconnect tokens lost 90% of their value almost immediately upon the news. See updates here: Investors Lose 90% of Their Bitconnect Investment on Paper as Bitconnect Closes its Lending and Exchange Platform During Bitcoin Correction. Keep an eye out for similar platforms in the future, for example BitsTrades.

Notes on Bitconnect

What we can do however is offer up some insight that can help you make up your own mind. First some notes, then some facts pertaining to why people say Bitconnect is a pyramid scheme / Ponzi scheme (and why some people will invest anyway; after-all this is the case with many such models).

A disclaimer: I’ve only researched Bitconnect (BCC). And, I only did that after noticing that it had moved up into the top 20 cryptos by market cap! I found this odd. As I dug deeper, the story only got weirder. Clearly, I’m not the only one who thought it seemed like it might be a scam (see the citations for some examples, this article is late to the party, but better late than never). With all that said, I haven’t invested in BCC yet. I will likely play the guinea pig for the benefit of the site in the near future… but honestly, I’m not eager. I find investing in Bitcoin directly, with the upcoming Segwit2x fork on the horizon, stressful enough on its own (as I am personally wary of a post fork dip given the absurd run BTC has had recently). I’ll update the page when I do try Bitconnect, for now all I have is some limited experience with MLMs (Multi Level Marketing “opportunities”), a few years of experience with crypto, and a few solid hours of Bitconnect research.

Next the good: Bitconnect offers attractive returns (if you can get ’em) and uses a theoretically cool PoS / PoW hybrid mining scheme (meaning new coins can be mined and/or gained as interest from holding existing coins). Ultimately there is a token (there is a cryptocurrency underneath their odd system). Further, their Bitconnect token currently has a value in USD and BTC on the few exchanges it is listed on (that means there are active buyers in a market willing to trade Bitconnect tokens for USD and BTC… at least on a few exchanges, some if not all of which seem to have a direct relationship with Bitconnect the entity). So it appears they have at least a little leg up on other “coins” accused of being scams like OneCoinBitpetite, and REcoin. Ultimately, if this is like other popular MLMs, then it isn’t a full on scam. Rather, it is just a cryptocurrency version of the pyramid-like MLM model that many refer to as a scam despite the fact that some people end up doing well under that structure. Remember though, we don’t know the future, and articles like “UK threatens to shut down popular Bitcoin investment site BitConnect” are required reading before entering into Bitconnect. The person trying to get you to enter their downline is likely going to paint a rosy picture, so make sure you have a sober understanding of the risks before locking your Bitcoins up for a year.

Why did Bitconnect’s market cap go down? Bitconnect has a marketcap of $592,505,917, that is down about $1,500,000,000 since people started asking if it is a scam. Market cap is the total dollar market value of a company’s outstanding shares (calculated from multiplying a coin’s shares outstanding by the current market price of one share). In this case the market cap went down because the calculation of total coins outstanding went up, not because the price per-coin went down. It is unclear why the previous tally was incorrect (I’ll update you as I pin down the answer there).

FACT: Someone on Twitter essentially goaded Ethereum’s Vitalik Buterin into suggesting that the structure of Bitconnect had a Ponzi scheme vibe. Buterin is obviously on-board with a PoS model (a proof of stake model for mining, which creates new tokens as interest paid to existing token holders), as Ethereum itself is musing on switching over to this model. However, the payouts that Bitconnect claims to offer is what caused the alarm. Let’s not get confused and think Buterin did a full case review here, he just said what anyone would be thinking, that is “these high payouts seem unsustainable and thus seem like a Ponzi scheme.”

Bitconnect scam alert! Is this 800 million dollar cryptocurrency a ponzi scheme? It went from $800 million, up to $1.5 billion, down to about $600 million again.

NOTE: One thing to think about in Bitconnect’s favor is this. Let’s assume it is an upstanding business and ends up doing nothing but what it claims. Now, let’s say you plan to hold Bitcoin for 5 years NO MATTER WHAT. That means you won’t consider trading if it goes up $10k or down $6k. You WILL ALWAYS HOLD. If all this is the case, then earning interest while you hold is logical. There are a lot of “ifs” here, if Bitconnect survives and does what it says, if you really would hold Bitcoin no matter what, but there is some logic in here.

Reasons Why Bitconnect is Accused of Being a Scam By Some

From my research, the following points are worth noting regarding the pros and cons of Bitconnect and why some think it is a scam (while others think it’s a great business opportunity):

The whole vibe and structure of Bitconnect is like a traditional MLM (Multi Level Marketing) “business opportunity.” Some people say that the pyramid-like structure of Bitconnect and other MLMs is literally what a Ponzi scheme is (it mashes up a confusing referral program with a cult-like vibe).

The more people you refer, the bigger your bonus gets. This multi-tired pyramid like structure is common to almost all MLMs.

MLMs tend to do live events full of hype and no substance. Bitconnect does this.

MLMs alway use buzzwords like freedom, stability, independence, etc. They call you a company and a business. They make you feel like you are a successful business person. Bitconnect uses this gambit. As an actual business person, this has always rubbed me the wrong way. Real business opportunities require hard work, lambos are something that people in rap videos and people with trust funds have. I’m not saying that a business owner won’t blow a bunch of money on a lambo, I’m only saying that when you work hard for your money you tend to spend it on more sensible things (like Bitcoin itself).

Pyramid schemes tend to promise returns that are too good to be true. Bitconnect does this.

Bitconnect’s Twitter spends a lot of time warning you about scams. That seems a little shady. I mean, we do that, but… we aren’t selling you a token.

No one knows who is running Bitconnect (although they just did a live event). So, there is no one to hold accountable if say someone runs off with countless millions in Bitcoins.

The market isn’t exactly setting the price. The price of Bitconnect is directly influenced by the platform. It’s essentially part of the package. So it didn’t organically grow to the current price, it’s tied to the growth of the Bitconnect user base (where new users pay more and more Bitcoin the later they sign up). As long as new users pay a higher rate and Bitcoin’s price goes up, paying out existing users is somewhat sustainable (especially if they are paid in Bitconnect tokens). However, if Bitcoin’s price goes down, there is potential for things to get messy. Speaking of which…

…Bitcoin has been going up recently. Thus, it makes sense that people would be getting payouts from Bitconnect at the moment… All they have to do is take your BTC, sell it for a profit, and then give you back a bit… but what happens when that stops?

Bitconnect gives you a native token in exchange for Bitcoin. The Bitconnect token only has value as long as people are willing to pay for it. It is the same with Bitcoin, but there is a lot of demand for Bitcoin on the open market. Meanwhile, good luck selling a Bitconnect anywhere other than on their native platform and 3 other exchanges.

Bitconnect says it is decentralized, but between them creating the token, the payout system, and a Bitconnect exchange… it seems pretty centralized to me.

Bitconnect claims that they use a trading bot to make profits. This is how they explain the insane returns they offer. The problem here is two-fold. 1. Either this is BS and payouts are simply divvied up out of the Bitcoin they are taking in; or, 2. They are one of the forces currently manipulating the Bitcoin market (i.e. they [their bots] are the whales who spiked BTC’s price). Shoot, go down that rabbit hole and you might start suspecting they are behind Bitcoin Gold or even Segwit2x. Imagine if everyone was giving these people millions in Bitcoin, and then they turned around and used that stash to manipulate the market, only to take out more money. They could be scamming on an epic level, like a multi-layer scam that makes Madoff look like a chump. Why is Bitcoin up so much since the summer? Is it a natural bubble, or is the entire community about to get taken to the cleaners? There is a rabbit hole of conspiracy theories one can come up with here…. but I mean, if you are watching the fundamentals on the exchanges on a daily basis, you are likely in the skeptic camp along with me (not a hater, but a skeptic, who is asking, “why is this thing I love so much going off the rails to a degree where I’m not even wanting to hodl anymore”).

With Bitconnect, your returns are guaranteed (according to the site). However, to get this guaranteed return you have to lend out your Bitconnect tokens. So you trade your Bitcoin for  tokens called Bitconnect (BCC), then you lock up your money by lending it, then you get USD back daily (they say you get USD, but the way the PoS mining works… it really seems like you get BCC back). This is all handled from within Bitconnect’s platform. I tried to Google around and find someone who had gotten a payout, but I just found a bunch of odd comments trying to get people to use their referral link.

The bottomline: Clearly Bitconnect uses an MLM structure. MLMs aren’t illegal. In fact, the US Government seems A-OK with certain MLMs. If it is good enough for Uncle Sam, well then it’s probably good enough for some of you. This is the case with other longstnading MLMs. I say to my friend “I’m not sure about this.” They say to me, “they told me you would say this, we can’t be friends any more because you want to crush my business opportunity” (something like that). So I assume it will be the same deal here. If you want to be extra cautious, realize that Bitcoin itself offers amazing returns. You can even set up your own trading bot (if you want to rely on a bot). You aren’t going to get the pep rally you get with Bitconnect, but on the other side of the token, you won’t be subject to the risks of Bitconnect either. The important thing here is to come into Bitconnect with a sober mind, don’t transfer the hype of Bitcoin onto Bitconnect. A decentralized currency like Bitcoin requires no middleman, don’t feel like you have to move down the coins by market cap to find a good money making opportunity, you can always just invest in Bitcoin directly.

Earn $5 in bitcoin after your first trade on Coinbase.

  1. The BitConnect scam exposed
  2. BitConnect scam

What do you think?

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Darnell Lambert on

Hi Thomas!
Great thoughts! Personally I agree with your opinion: it’s pointless to agitate others to invest or to avoid.
It basically depends on risk management tactics one wants to apply.
I’ve written my own review of BitConnect, you’re welcome to check it here:

Also, basically they don’t guarantee a fixed daily profit, but they do guarantee bonuses for bigger initial investments: from .1% to .25% depending on starting amount.

Thomas DeMichele on

Hmm, I think your outlook is fair.

There are many long standing pyramid schemes that people love and cherish that are alive and well and certified A-OK by the U.S. government (at least they pay their taxes and have never been shut down).

So who am I to tell people what to do with their Bitcoins? Want to lock them up and let Bitconnect bots trade them for a year? Then that is what a person wants. Right?

I am a hard no on Bitconnect, but we aren’t here to tell people what to do with their money. We are just here to give them the facts on cryptocurrency (like the site name implies).

Your site seems to be doing about the same. Good luck to you and your ventures.

Thomas DeMichele on

NOTE: There are also a lot of investment products out there where you have to commit your money for a return. I think one shady thing about Bitconnect is the high payouts (which draw into question sustainability), another is that the crypto space is so volatile you are also taking a bet that Bitcoin will be around in a year.

What if Bitcoin Cash takes over and you lock up your Bitcoins during that and can’t shift?

There are so many problems with this whole thing, but I have my fingers crossed it all goes well for all parties involved (for Bitconnect, for those pushing them, and for their investors).

Bravo on

Bitconnect has a proven Business model.
It’s not a Ponzi scheme with people just throwing money at it because people are making money.
You could say that about every Stock Equity Company that is not yet showing a profit.
Bitconnect doesn’t just pay 1% per day, sometimes it is much less and some days closer to 2%.
Crikey, I just made 6% on Litecoin Yesterday and I am a lousy trader. So what is the big deal.?
Every business caries a risk.
You can invest $200 and in 2 years time, start receiving $500 per day just by re-investing your profits as soon as they come in.
I think it’s worth risking $200 for a great Payday down the track. I’m in.
Albert Einstein said” Compound interest is the 8th wonder of the world.

Try bitconnect for great EARNINGS not just sitting there waiting on hodL.

Thomas DeMichele on

Compounding interest is great, trading crypto is great, investing in crypto is great, and I do hope that Bitconnect does well and so do its users.

However, its important that people realize the pros and cons (and general facts) of investing in Bitconnect and other like entities.

Even if Bitconnect ends up being a really above board MLM, its still an MLM. And people need to understand the choice they are making before they make it.

I don’t tell people to do it or not do it, but I won’t be pushing anyone to do it just so I can add them to my downline (speaking metaphorically here). Not without giving them the facts first.

Some people will choose MLMs and indexes and CDs and bonds. Some people will choose to lock up their money for a return, others won’t if they have all the facts.

Those ready to take the risk, I won’t stop. Those who don’t fully understand crypto and the structure of these things, I think we all have a duty to educate rather than to pump a product using emotional appeals rather than facts to get them to lock up with Bitcoins for year.

I’ve never met an MLM person who loved me, but I’ve never given one a reason to hate me. I’m trying to be evenhanded here. I WANT BITCONNECT AND ITS USERS TO SUCEED.

P.S. The difference between Bitconnect and trading Litecoin is the difference between liquidity and ownership of private keys and taking a chance on a crypto MLM. Clearly.

All this said, good luck to you! I took out your referral link, because we don’t do that sort of thing on this site. But otherwise, thanks for your comment, and fingers crossed that you do well with all your ventures!

Mike Crilley on

So Thomas, seven weeks later have you come to any conclusions? Have you tried to get any of your interest out?

Thomas DeMichele on

I have been keeping a ear out for news. So far it seems like the machine is still running.

I am not eager to personally put my money in a system like this. I like to make my own trades on the open market, it is one of the joys I get from crypto. I’m not as interested in “getting money” as I am in trading, holding, supporting coins I care about, learning and writing about crypto, etc.

That said, I personally know some people who do Bitconnect, so I have a finger on the pulse and should be aware of how it plays out enough to report it here.

Fingers crossed it all goes well. I the idea of people being taken advantage of frustrates me to no end. Every penny given to a scammer is one less penny voting on the open market. Worse, it could I think turn off would-be investors.

I’ll make sure to keep everyone updated with what I find!