Since September 2017, BitConnect had tripled its market cap and became the 8th largest crypto, according to the CoinMarketCap. But recently the coin is facing a massive controversy because of its too good to be true scheme.
The firm is offering an insane scheme to the public. With its four-tier investment system, the returns get more lucrative based on your initial investment. But it is promising that, irrespective of the initial investment, everyone will earn up to 40 percent total return per month. This translates to 1 percent RoI per day.
A few days ago, Ponzi Crypto Coins, an account dedicated to uncovering suspicious crypto deals luring newcomers, asked Vitalik Buterin and Charlie Lee about the scheme on Twitter.
Even though Buterin shot a quick reply denying any knowledge of BitConnect, he was quick to point out that if it is offering a 1 percent return a day, chances are it is a Ponzi.
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The Reddit community quickly followed the conversation, and there was an uproar about the schemes of BitConnect - after all, it is one of the leading coins in the market. The community cited the resemblance of BitConnect to Bitpetite and Onecoin, the former a very similar Bitcoin lending investment alternative which is being accused of running a scam.
When we analyse the scheme, we can see its dubious motives. Yes, the coin promises lucrative rewards for lending Cryptocurrencies , but the payout is only in BitConnect coins. Also, the catch is that you do not get the value of coins as seen on paper, only the value of your initial cash investment. So with the current soaring prices, one would receive a much smaller amount, and with the bull Bitcoin, BitConnect could also make a fortune.
For instance, if someone invested 1 BTC when the value was $3000, on paper he might have rewards, but if he decides to withdraw his funds, he will only receive his initial investments that too in BitConnect coins. Meanwhile, BitConnect would have kept the Bitcoin whose current market value is over $7000.
Due to a technical recalculation of tokens in circulation, BitConnect recently dropped from 8th position to 15th on CoinMarketCap. The update certainly no longer considers the current tokens under loan as a part of its market valuation. This also took the market cap of the coin from over $2 billion to mere $582 million.
With the boom in the crypto space, BitConnect is not the only such scheme - it is an old one that continues working, making it even more dangerous.
