Yeah it generated demand because bitconnect had profits from it and could market the coin. If they didn't make any profits from it and just stole it from investors, then it would have been a Ponzi. It would only collapse if people didn't want to pay X amount for the BCC coin but there would be no reason for them not to. Lenders didn't mind what price the coin was. Only when people started getting nervous about lending, for example if they started going into reserves without reducing the interest rates, could it collapse. They could have easily found other ways to keep demand for the coin while they reduced the interest rates because most of the coins would be locked in lending and couldn't be sold.
"Could have easily" but didn't? How is that not a scam even if you truly believe all that garbage that you're making up?
Bitconnect didn't have any real business or any other kind of revenue to back the scheme so they relied on people bringing in more money. That can't last forever and it didn't. They closed their scheme once the amount of new money started tapering off. It's a classic ponzi scheme. Having profits and doing marketing is irrelevant. Of course scammers have profits and of course they want to market their scheme to make more money. It's still an illegal unsustainable scheme.
The lending itself was profitable for them without them stealing from investors. The coin price is based on the demand for the coin which had a large community of people. Many didn't lend and just staked the coin as that normally paid quite a lot more than lending. If more people did lending, bitconnect would have been able to do more marketing with the extra profits.