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BitConnect Closes Exchange as States Warn of Unregulated Sales

(www.bloomberg.com)
389 points JumpCrisscross | 4 comments | 17 Jan 18 01:04 UTC | HN request time: 0.001s | source
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ve55 ◴[17 Jan 18 01:56 UTC] No.16164829[source]▶
For those unaware, Bitconnect was a Bitcoin-based ponzi-scheme that had operated 'successfully' for quite some time. I don't say 'ponzi' as an insult in the way some do for cryptocurrencies, it was quite literally just a bare-bones ponzi scheme, where you deposit your money (Bitcoin) on their website, buy their token, 'lock' your funds for some amount of time, and you are promised very high interest rates while encouraged to re-invest your returns.

What has happened today is Bitconnect has closed the exchange on their website, and so users flocked to some of the only other exchanges (of dubious reputation, since no reputable exchange wanted to list the BitConnect coin) in order to sell their now-worthless tokens, resulting in losses of around 90% today: https://coinmarketcap.com/currencies/bitconnect/

Many famous Youtubers and other individuals with influence convinced hundreds of people to put their money into BitConnect in order to profit off of referrals, leading to a lot of unfortunate losses and a lot of delusion and misinformation among devoted investors. The general sentiment towards those that lost money due to BitConnect has been a mocking attitude in the cryptocurrency investment communities, as BitConnect has been referred to by many as a blatant ponzi scheme for months.

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StavrosK ◴[17 Jan 18 03:27 UTC] No.16165220[source]▶
I know a few people who fell for this, despite my warnings. When you tell someone "these returns are astronomical, teams of PhDs in hedge funds cannot come anywhere close, do you think they're so dumb that they wouldn't put billions in this if it were legitimate" and they reply "yes, I do", there's no helping them.
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toomanybeersies ◴[17 Jan 18 05:55 UTC] No.16165791[source]▶
People love to think they're smarter than those 'experts'. It's a combination of Tall Poppy Syndrome [1] and the Dunning-Kruger Effect [2]

[1] https://en.wikipedia.org/wiki/Tall_poppy_syndrome

[2] https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

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gbersac ◴[17 Jan 18 14:32 UTC] No.16168116[source]▶
The fact that you invest in crypto is thinking you are smarter than many well respected experts like Warren Buffet. If you invest in cryptocurrencies (and I do), you are not any more clever than those who bought into BitConnect.
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throwaway413 ◴[17 Jan 18 15:12 UTC] No.16168518[source]▶
Oh yeah and assuming Warren Buffet et al can literally never be wrong is so much smarter.

The world is not black and white.

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metamet ◴[17 Jan 18 15:28 UTC] No.16168649[source]▶
No, but ponzi schemes and Crypto are on the same spectrum in terms of traditional financial advisement.

Only up until very recently did Crypto as a whole break away from it, and BitConnect just happens to have its foot in both.

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1. throwaway413 ◴[17 Jan 18 18:01 UTC] No.16170138[source]▶
No they're not - they are separated by the fact that one's sole purpose is to commit fraud, while the other actually has to do - however much - with technical merit. The however much part exists in every other type of market..there is a subset of people that will always try to game the system of any system they exist within. This is nothing new. That subset can vary in size based on qualities of said market, yes, but the intent of the market is not solely to enable those people.

Saying cryptocurrency only recently broke away from this is just a conclusion of your premise, which I disagree with entirely due to the existence of material like Bitcoin's whitepaper. To say they are on the same spectrum is just misleading.

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2. metamet ◴[17 Jan 18 20:44 UTC] No.16171611[source]▶
You completely missed the part of my post where I said "in terms of traditional financial advisement".
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3. throwaway413 ◴[17 Jan 18 21:29 UTC] No.16172041[source]▶
Ok. Would you mind clarifying/elaborating on that?
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4. metamet ◴[18 Jan 18 15:41 UTC] No.16177901{3}[source]▶
Sure. It's basically the fact that the sentiment regarding crypto in the traditional world of financial advising has been equated to ponzi schemes. The value of the technology hadn't been validated or proven to point where holding BTC had any inherit value beyond what others who wanted the BTC were willing to pay for it. The market pressures weren't real.

However, smart contracts and the adoption of the blockchain by technology's bigger players has provided some validation to what's happening. Regardless of the white papers, and how one individually assessed the thesis, it didn't have market adoption and it wasn't as if BTC was actually producing something. So investing in BTC (a virtual commodity in limited value) had no real business purpose.

So crypto was in the same boat as ponzi schemes, until very recently. Now it's being taken seriously due to providing actual value.

The only thing BTC is really good for right now is to act as an intermediary between it and alts--since you can buy BTC and ETH with fiat, then transfer those to alts. BTC isn't a valid currency for transactions for a variety of reasons. It is simply the backbone of the crypto economy at this point, and the grandfather of the technology--so there's some lure to it as a limited asset that, so long as someone wants it, someone can sell.