The price of BitConnect's controversial cryptocurrency has cratered following Tuesday's news that its lending and exchange operation is shutting down – and investors have been unable to sell their tokens despite claims the site would stay online this week.
The closure of BitConnect's lending and exchange platform was a major development given that its sales pitch prominently features the promised returns from lending out the currency, known as BCC, via the site. After the announcement, the price of BCC tanked on the few public markets on which the cryptocurrency trades.
According to data from CoinMarketCap, BCC was trading above $400 at the start of 2018, yet in the wake of Tuesday's bombshell, the price has fallen by more than 90%, trading at roughly $17.25 per coin as of press time
Akin to high-yield investment plans, BitConnect touted larger returns based on the amount loaned (users would deposit bitcoin and buy BCC in order to lend).
As might be expected, BitConnect drew comparisons to cryptocurrency investment schemes such as OneCoin, which was widely believed to be a pyramid scheme.
The allegation that BitConnect is a Ponzi scheme – in which earlier investors are effectively rewarded with the proceeds of new investors – gained traction in recent weeks as state regulators in the U.S. issued cease-and-desist letters to the outfit in connection with an initial coin offering.
The mix of regulatory scrutiny and "bad press" was ultimately blamed for the platform shutdowns. And now, users are crying foul and searching for answers amid a wider plunge in cryptocurrency markets.
The situation is playing out across disparate social media channels, with the main BitConnect subreddit being set to private (it has been alleged that this was done intentionally by the subreddit's moderators).
Exchange down already
In its announcement yesterday, BitConnect said that it would close its lending market effective immediately, but that its exchange for the BCC token would remain open for the rest of the week.
Yet users are reporting on social media that this is not the case, complaining that the site isn't allowing them to process trades because the exchange is unavailable.
@bitconnect doesn’t allow me to get my money. I can’t exchange to Bitcoins. #bitconnectworthless pic.twitter.com/nfOpQc660b
— Bea Jacobs (@nbjacobs1) January 17, 2018
In an email to CoinDesk, one BitConnect investor, who claimed to have lost upwards of $400k, reported being unable to cash in BCC tokens via the exchange.
[Update: In a follow-up post to its website on Jan. 17, BitConnect said that it would allow access to its exchange "tomorrow.]
With the BitConnect subreddit closed off to public viewing, some investors have since shifted to the r/cryptocurrency subreddit to further discuss the situation.
The posts suggest that the financial fallout from the BitConnect mess could reach into the millions of dollars, if not more. BitConnect once offered a referral program, and numerous accounts relate how supporters solicited friends and family to invest as well.
Indeed, some of the ire has also been directed at YouTube posters who advocated for BitConnect, with some of those being accused of removing positive videos in light of the platform closures.
An email from CoinDesk to the BitConnect team was not returned by press time.
CoinDesk will continue monitoring this developing situation.
Image via Shutterstock