Bitconnect shut down its lending and exchange platform with little warning. Investors subsequently lost 90% of their value on paper. Here is everything you need to know.
Bottomline: Bitconnect returned investments from its lending program in Bitconnect tokens (BCC) at $363.62 USD a token. Those tokens are now worth $20 – $30 (depending on the day). Meaning investors lost as much as 90% of their investment on paper (the specific amount depends on when they bought in and the current price of BCC), but they didn’t lose everything (they still have that, plus any Bitconnect tokens they earned as interest). Bitconnect claims it will continue to support the token, but will no longer offer its on-site exchange (where Bitcoin is traded for Bitconnect) and lending program. This indeed does imply that Bitconnect kept everyone’s Bitcoin and simply paid everyone off in Bitconnect tokens (as its critics had feared would be the case). So what happens now? Well, Bitconnect tokens could rise in value, or they could fall. Thus, a BCC holder needs to come up with their plan B, do they hold and hope for a BCC recovery? Or, do they recoup a portion of their investment by finding an exchange BCC still trades on and selling some or all of their BCC? I won’t offer advice here, but you are feel free to ask for opinions in the comment section.
The main points to understand are:
- Bitconnect has long been accused of running a crypto Ponzi. On one hand it accepted Bitcoin and offered Bitconnect tokens in exchange (via its exchange). On the other hand it offered a MLM-style lending program where an investment was locked up for one year and returns of up to 1% a day were promised (but larger returns were offered to those who got others to sign up). The idea was that Bitconnect would use a trading bot that traded volatility to invest all the Bitcoin they got, and the profits would be passed along to investors. This model was thought to be unsustainable by many (those many included developers of major coins and traders who used trading bots to trade volatility and knew darn well that those returns were hard / nearly impossible to pull off).
- Due to their model, Bitconnect got a lot of bad press over the past months and even got some cease and desist letters from states. Given all the bad press, Bitconnect set up a news portion of its site and got itself listed in news sections of major search engines. Now when you ask the internet about Bitconnect you get updates directly from Bitconnect which frame everything happening in a positive light. This has not helped people understand what is going on, and it did not help people see the warning signs leading up to the shut down.
- What is going on is that Bitconnect shut down its lending and exchange platform with little warning when Bitcoin entered a correction on Tuesday January 16th. This was essentially what critics predicted (including us). That is, that Bitconnect would continue to pay out until Bitcoin suffered a major correction, but would bail and take off with everyone’s Bitcoin the second things went bad (this would be what a classic Ponzi would do; as, for as long as Bitcoin went up, paying people was easy, but when it went down a lot, the money would start to run out). This is exactly what happened.
- The news isn’t good, but it isn’t all bad. Bitconnect has attempted to save face and ward of ire by “returning investments” in the form of Bitconnect tokens. Meaning, investors in Bitconnect haven’t lose everything. Their investment was returned to them in the from of Bitconnect tokens (that is Bitconnect tokens which trade under the ticker symbol BCC… not to be confused with Bitcoin Cash which trades as BCC on some exchanges and BCH on others). The tokens were returned to them at the price of $363.62 USD (the average price of Bitconnect for 15 days before the announcement). In other words, if you lent $363.63 cents, you got 1 Bitconnect token back. The problem with this is that you didn’t get Bitcoin back, you got Bitconnect tokens back, and while Bitcoin is currently worth over $11k, Bitconnect is currently worth about $30 (its value dropped over 90% almost instantly after the announcement as it released its tokens… thus flooding the market in the middle of a panic). In other words, long story short, if you used Bitconnect you lost over 90% of your investment. NOTE: If you made interest from Bitconnect you got that interest in the form of Bitconnect tokens, so you have that as well as your initial investment. Likewise, if you traded your Bitcoin for Bitconnect tokens on their on-site exchange, you still have those.
- With the above noted, Bitconnect tokens will continue to trade on some exchanges and continue to be supported by Bitconnect (for example you can still use their wallet service). Meanwhile, there is potential that the Bitconnect token will rise in value over time (especially if the Bitconnect team can launch their new ICO-based exchange and get some other exchanges to pick it up). Thus, although there is little to celebrate, it isn’t a complete loss.
- Meanwhile, as noted, Bitconnect was in the middle of doing an ICO. According to Bitconnect, “BitConnect X ICO is still functional and we are building an exchange platform on the BitConnect X website.” FRIENDLY ADVICE: Investors should logically be cautious about investing in yet another Bitconnect product given the recent events. However, if you are already invested in their ICO, you’ll be happy to know they are saying it is still on.
In summary: The Bitconnect token is still tradable and Bitconnect wallets still work, but the Bitconnect on-site exchange and lending platform have been shut down. Investors have lost about 90% of their value on paper and won’t get their Bitcoin back, but they aren’t left with nothing. There is a chance that Bitconnect tokens will rise in value and that the team will step up and continue to support Bitconnect. However, there is also clearly a chance that prices will fall. Thus, there is no perfect advice as to what one should do with their tokens. In general it is important to be skeptical of platforms like Bitconnect, when someone offers you something that is too-good-to-be-true… it often is.
This is to inform all community members that we are closing the Bitconnect lending and exchange platform. We are closing the lending operation immediately with the release of all outstanding loans. With release of your entire active loan in the lending wallet we are transferring all your lending wallet balance to your BitConnect wallet balance at 363.62 USD.