The craziest crypto scams and hacks: Part 4: How Bitconnect’s ponzi scheme turned out to be a $4.5 billion dollar scam
Welcome to the cryptohunt jam where we spend one minute a day on crypto and its history. In plain english.
Today's episode is another cautionary tale: When things sound too good to be true, and scammers hope you don’t fully understand how a system works, bad things will happen.
Bitconnect itself was a cryptocurrency released in 2016. Remember, this was when crypto had its first bull run, and everyone wanted to get in on it.
That context is important to understand Bitconnect. You could buy it for Bitcoin and were promised a daily interest of around 1% from a secret algorithmic trading bot, 50x more than the stock market.
On Bitconnects exchange, you could then swap between Bitcoin and Bitconnect. But the bot wasn’t actually doing anything, it was made up. And that meant that the system only worked as long as more people bought into it than cashed out. It’s called a Ponzi Scheme - that means those buying in pay for those exiting the system. When government agencies took note in 2018, Bitconnect shut down and the token plummeted in value by over 90% in a single day. Investors lost over $4bn dollars.
This story is a great reminder, because crypto is not easy to understand. People want to invest, because they see others make money, but ignore that they don’t know why. Especially crypto, which is complicated with few resources that make it easier to understand, is susceptible to those frauds.
But we hope that this podcast is changing that for you, and bit by bit, you learn the building blocks to make up your own mind. Check out cryptohunt.it as well, where you can read reviews on every project soon.
And next time: How Ethereum almost died because of a hack.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.
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The craziest crypto scams and hacks: Part 4: How Bitconnect’s ponzi scheme turned out to be a $4.5 billion dollar scam
Welcome to the cryptohunt jam where we spend one minute a day on crypto and its history. In plain english.
Today's episode is another cautionary tale: When things sound too good to be true, and scammers hope you don’t fully understand how a system works, bad things will happen.
Bitconnect itself was a cryptocurrency released in 2016. Remember, this was when crypto had its first bull run, and everyone wanted to get in on it.
That context is important to understand Bitconnect. You could buy it for Bitcoin and were promised a daily interest of around 1% from a secret algorithmic trading bot, 50x more than the stock market.
On Bitconnects exchange, you could then swap between Bitcoin and Bitconnect. But the bot wasn’t actually doing anything, it was made up. And that meant that the system only worked as long as more people bought into it than cashed out. It’s called a Ponzi Scheme - that means those buying in pay for those exiting the system. When government agencies took note in 2018, Bitconnect shut down and the token plummeted in value by over 90% in a single day. Investors lost over $4bn dollars.
This story is a great reminder, because crypto is not easy to understand. People want to invest, because they see others make money, but ignore that they don’t know why. Especially crypto, which is complicated with few resources that make it easier to understand, is susceptible to those frauds.
But we hope that this podcast is changing that for you, and bit by bit, you learn the building blocks to make up your own mind. Check out cryptohunt.it as well, where you can read reviews on every project soon.
And next time: How Ethereum almost died because of a hack.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.