Today, we know the warning signs well. Pyramid schemes are nothing new, and most of the red flags to look out for are common knowledge. So how did Bitconnect get away with scamming their investors out of billions of dollars? The magic surrounding crypto is still very fresh in our minds and because of this, anything seems possible. Exorbitant promises were made from Bitconnect’s end, but the result was just a simple Ponzi scheme, using the investments of newer participants to fund the investments of earlier users. In effect, the company had the appearance of being profitable, but in reality it was only a matter of time before it would crash and burn.
And just as quickly as it had emerged, it disappeared. In January 2018, the company announced it would be shutting down its crypto lending and exchange platform. The damage left a 90% loss of currency value, customers being unable to withdraw their own currency, and investors losing thousands of dollars with one Reditt user claiming to have lost over half a million dollars of savings. The aftermath extended even to well-known and trustworthy names in crypto like Bitcoin and Ethereum, both dropping 30% and 20% in value, respectively.
At its height, Bitconnect had a market value of over $2 billion and in just a few short days it all came crashing down, dragging investors down with it. Take a look at this infographic for more on the fall of Bitconnect and what that means for the future of crypto.