As cryptocurrency prices have careened downward during 2022, transaction volumes for both illicit and legitimate entities are, not surprisingly, behind their 2021 pace. However, according to blockchain analysis firm Chainalysis, criminal activity has been far more resilient during the crypto crash.
Chainalysis’ Mid-Year Crypto Crime Update reports that in the face of price declines, illicit volumes are down 15% as of July, compared with the same time last year, while volume for legitimate crypto entities has fallen at more than twice that rate and was down 36% during the period.
Nevertheless, despite the drop in volume for illicit crypto entities, losses incurred from cryptocurrency hacks have risen sharply so far this year, with $1.9 billion worth of cryptocurrency stolen in hacks of services through July, compared to just under $1.2 billion at the same point in 2021. And “this trend doesn’t appear set to reverse any time soon,” the Chainalysis update says.
While losses from crypto hacks have surged, total scam revenue for 2022 is 65% lower than where it was through July 2021, which, per Chainalysis, appears linked to declining prices. However, it’s not just scam revenue falling, as the total number of individual transfers to scams so far in 2022 is the lowest in four years, says the report.
“Those numbers suggest that fewer people than ever are falling for cryptocurrency scams,” says the report. “One reason for this could be that with asset prices falling, cryptocurrency scams—which typically present themselves as passive crypto investing opportunities with enormous promised returns—are less enticing to potential victims.”
The report also hypothesizes that the crypto crash has weeded out a lot of new, inexperienced investors who are more likely to fall for scams and more likely to participate in the market when prices are rising and they’re drawn in by the hype and the promise of huge returns.
Darknet market revenue is also down sharply so far this year, according to Chainalysis, and is 43% lower than where it was through July 2021. The report says this is likely due to the April shutdown of Hydra Marketplace, which it says acted as a hub for illicit activity for years. It also notes that the decline in cryptocurrency value received by all criminal categories after Hydra’s shutdown “shows the tangible impact of law enforcement’s growing ability to fight cryptocurrency-based crime.”