It’s been a bad year for crypto so far – between large companies going under, a slew of cyberattacks, and – most importantly – the value of assets taking a nosedive, overall legitimate volumes have plummeted by 36% year over year., said Chainalysis.
However, there is a silver lining – the illicit trading volumes have also dropped by 15%, despite the millions laundered from heists on Harmony and other platforms.
The decline in illicit crypto trading volumes can largely be attributed to a decrease in large-scale scams. It’s important to note that rugpulls and other nefarious activities perpetuated by scammers tend to thrive in bull markets. 2017, for instance, saw a slew of hastily built crypto projects with no real value receive serious funding from new investors with a bad case of FOMO, only to disappear without a trace.
Bear markets, on the other hand, are off-putting to new investors who might be unable to recognize scams outright. Therefore, it stands to reason that fewer newbies risk falling for bad projects.
As a result, the current year saw around $1.6 billion stolen in scams. While this is by no means an insignificant number, it is 65% lower than the amount swiped in scams between July 2020 and July 2021.
The volume of crypto traded through darknet markets also took a tumble. Crypto exchanged for illicit goods and services dropped by 43% year over year. However, we should not attribute this to a decrease in interest in said goods and services. This decline is probably tied to the shutdown – and subsequent confiscation of over $25 million in assets – of Hydra Marketplace following an operation led by German authorities.
Therefore, this drop should be assumed to only be temporary, much like the closure of Silk Road in 2013, after which plenty of other darknets eagerly took over a bigger share of the market.
Unfortunately, illicit activities in crypto have seen a rise in another domain, despite the overall drop. Funds stolen from DeFi and exchanges have seen a sharp uptick year over year – $1.9 billion as opposed to $1.2 billion.
With Solana, Axie Infinity, and Nomad, just to name a few, 2022 has shown that many crypto platforms have a long way to go before the claim of security too often bandied about on any crypto-related platform can be taken seriously.
Now that the market seems to indicate a return to stability, only time will tell if the downward trend in cybercrime-related crypto volumes will continue to decrease – or whether stronger markets will bring malfeasants back into business as well.