Bitconnect is down. The controversial cryptocurrency exchange platform which we flagged a few months ago is now inaccessible. Users are unable to cash in on the native BCC token with dozens crying foul.
The platform seems to be the first casualty of the massive cryptocurrency crash in the last two days after reports of Chinese authorities cracking down on cryptocurrency exchanges and mining.
$1 Billion Wiped Out of Bitconnect Value
The market lost almost a third of their market capitalisation in the ensuing crash with bitcoin selling below $10,000.
But it was the spectacular deflation of the native BCC token that was remarkable. BCC which is used for lending on the platform fell from as high as $400 to just $17 in the cryptocurrency bloodbath prompting Bitconnect to close shop. An estimated $1 billion was wiped out from its market cap. BCC has since climbed marginally to $38.75 according to CoinMarketCap.
The Bitconnect Coin started selling at just $0.16 in January 2017 at its inception. This was a price surge of more than 249,900%.
The company announced it was resuming operations but the site was still inaccessible on Thursday.
Massive Losses Caused by Bitconnect
One investor claimed he has lost more than $400,000 in investments after the platform crashed in a Reddit post. Another posted he had lost all his investment of $80,000. The Bitconnect forum has now been set to private in what is suspected to be a conspiracy among the moderators.
How Did Bitconnect Work?
Under the scheme, one is required to buy the BCC tokens using bitcoin which they can lend on the platform. Ponzi schemes give unrealistic returns with very little risk.
Under the scheme, funds from new investors are used to pay older investors. The plan is to continue attracting a large number of new members. The model crumbles when there is not enough money to go round.
For Bitconnect, it was the “unfortunate” coincidence of regulatory scrutiny, “bad press” and a spectacular cryptocurrency market crash that seems to have ultimately brought it down.
It has not been an easy month for the platform. US authorities issued cease and desist orders only last week.
The platform which offers peer to peer lending services has long been suspected to be a Ponzi scheme due to its unsustainable business model. Investors were promised a rather bloated 1% daily returns on their investment, obviously an impossible return.