Crypto crime falls 15% in 2022 due to bear market

2022 has been a tumultuous year for cryptocurrency so far, with large companies losing millions, bridge attacks and the plummet of crypto volumes of 36% year-on-year.  

On the bright side, blockchain intelligence firm Chainalysis just published a new report that shows the number of illicit activities involving cryptocurrency is down 15% in volume so far this year, compared to a 36% decline in legitimate transactions.
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Since January 2022, scam revenue has fallen more or less in line with Bitcoin pricing,’ the firm says. ‘The cumulative number of individual transfers to scams so far in 2022 is the lowest it’s been in the past four years.’

The decline in illicit crypto is attributed to the decline of asset prices and large-scale crypto scams. Chainalysis hypothesizes that less crypto investors are falling for scams that present themselves as passive investing opportunities with huge promised returns. It’s also important to note that crypto scams are more prevalent in bull markets, because new, inexperienced investors may be drawn in by hype and the promise of quick returns as asset prices are rising. 

The amount of funds stolen in crypto scams currently sits at US$ 1.6 billion, 65% lower than the amount swiped between July 2020 and July 2021.

The volume of crypto traded through darknet markets, exchanging crypto for illicit goods and services, is also down significantly, dropping by 43% year over year. This is linked to the shut down and sanctioning of dominant darknet market Hydra Marketplace, which existed as a hotspot for drug trades, hacking tools, stolen data and money laundering activities.

However, Chainalysis hypothesizes that the Hydra vendors and customers are moving their funds to new markets in search of a replacement. 

Despite the fall of the amount of crypto scams and darknet market trading activity, Chainalysis reports that up until July 2022, US$1.9 billion in crypto was still stolen in hacks. Examples include the US$ 190 million hack of the cross-chain bridge Nomad Token and the US$ 5 million swiped from Solana wallets earlier this month, compared to just under $1.2 billion during the same period last year.

Chainalysis further emphasized that the vulnerability of DeFi protocols to hacking because of their open-source code can be studied and used to steal locked crypto funds.