For years, cryptocurrency has been making headlines. As one of the fastest growing industries out there, the mystery surrounding it is just as tempting as the potential rewards; and many people are seeing dollar signs.
New on the block is Bitconnect, a cryptocurrency exchange platform along the same vein as Bitcoin and Ethereum. Bitconnect promised huge returns for any investment and ended up building a multi-billion dollar market value. For many investors, even seasoned ones, this was enough to ignore the warning signs of a bad business. At it’s core, Bitconnect was a simple pyramid scheme.
Fraudulent and unsustainable, Bitconnect relied on the investments of newer members to make the promised returns to earlier investors. Essentially this meant that for every two new recruits, the investment of one previous investor was protected. The multi-level pyramid tactic helped make it appear as if the investments were profitable, when in reality most of the returns came from new affiliates rather than actual investing.
Following the unceremonious shut down of Bitconnect has many investors shocked and frightened to try their hand at cryptocurrency. After all, it’s a highly unregulated and volatile industry with largely unpredictable highs and lows; that being enough to keep investors at arms length. But the recent events of Bitconnect are acting as a wakeup call for not just investors but for industry regulations.
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Whether the crash of Bitconnect was from bad press and cease and desist letters or if it was actually a Ponzi scheme makes no difference to the defrauded investors. At its height Bitconnect boasted a market value of over $2 billion and was pulling in hundreds of new users every day. Today, it’s a cautionary tale for bad investments. Take a look at this infographic for more on the rise and fall of Bitconnect, and what its demise means for the future of cryptocurrency.
Infographic Source: Best Bitcoin Exchange
