Bitcoin’s cost crashed to as low as $9,200 – a decrease of more than 50 percent from its highs mere months ago. Continued warnings of scams and a slew of hacks fanned fears that these emergent virtual assets would be subjected to a crackdown by regulators. Bitconnect further spooked investors when it announced Tuesday, January 16, it was closing down its operations.
Bitconnect is a site popular for trading and lending cryptocurrency. It was recently accused of operating a Ponzi scheme. A Ponzi scheme is an investment operation where older investors receive returns by revenues paid by new investors, not from business activities that are for profit or legitimate. Clients of Bitconnect saw the shutdown as proof of their suspicion. Some are concerned that they will be unable to withdraw their money once insolvency occurs during the exchange, considering that Bitconnect’s management has remained anonymous. Though Bitconnect assures its investors that their funds will be withdrawable, doubts are still aplenty as Bitconnect’s very own cryptocurrency similarly lost its value to as much as 90%. It did not help that customers have been receiving a consistent denial-of-service further disabling their ability to do money withdrawals. Meanwhile, Bitconnect claims it has received a “continuous” barrage of cyber attacks. Some customers also report technical difficulties when selling their positions. Issues such as these prompted numerous Bitconnect investors to post their worries on social media, with some declaring losses to thousands of dollars while a few claim their “family’s savings” were entirely depleted.
Besides Bitcoin, prices of Ethereum and Ripple similarly went down. The former’s price decreased almost 40% while the latter shed almost half of its original value. Though Bitcoin’s price returned to more than $10,000, it was still below its $20,000 peak last month. Scammers found these current cryptocurrency problems as opportunities. Accounts on Twitter emerged presenting themselves as the customer support arm of Bitconnect. However, such accounts were seemingly set up after the service has shut down. Twitter accounts such as @BitconnectStaff and @BitConnectExch are apparently preying on customers desperate to withdraw money from the platform by encouraging users to send their cryptocurrencies to another digital wallet address – transactions which once done are difficult to trace.
Bitconnect cites the reasons for its closure as “bad press”, as well as “cease and desist” notices it received from US securities regulators.