Bitcoin: Fraudsters Are Big Losers From Crypto Crash
The fall in cryptocurrency prices since the beginning of the year is a disaster for many investors, institutional investors and retail investors.
The crypto market has lost just over $2 trillion at the time of writing compared to its record high of over $3 trillion. This market, dominated by bitcoin and ether, the parent token of Ethereum, the platform for creating non-fungible tokens (NFT) and decentralized finance (DeFi) apps and games, is currently worth $1 trillion, according to data firm CoinGecko.
This crypto winter, as industry players call it, continues even as prices try to stabilize. Many small investors lost their savings as a result, while hedge funds like Three Arrows Capital (3AC) went bankrupt and prominent crypto lenders like Voyager Digital and Celsius Network filed for Chapter 11 bankruptcy.
Crypto Scam Revenue Down 65%
Another category of individuals has lost a lot in this crisis, and it’s not the ones you immediately think of: the fraudsters.
According to the research firm Chainalysis, illegal activity is falling with the rest of the market. Fraud revenue through July 2022 is $1.6 billion, down 65% from where it was at the end of July last year, and revenue from the darknet market is down 43% from last year, the firm said in a recent report.
Cryptocurrency transaction volumes this year for both illicit and legitimate entities are tracked for 2021 through July. However, criminal volumes are down 15% year-on-year, compared to 36% for legal volumes.
Since January 2022, fraud revenue has more or less fallen in line with bitcoin prices. Bitcoin prices fell by 49.5% between January 1st and July 31st. The number of transfers to fraud made by retail investors so far in 2022 is the lowest it has been in the last four years, Chainalysis said.
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“These numbers suggest that fewer people than ever are falling for cryptocurrency scams,” the firm concluded. “One reason for this may be that with falling asset prices, cryptocurrency scams – which typically present themselves as passive crypto investment opportunities with huge promised returns – are less enticing to potential victims.”
“We also hypothesize that new, inexperienced users who are more likely to fall for scams are less prevalent in the market now that prices are falling, as opposed to when prices are rising and they are drawn in by hype and the promise of quick returns.”
The biggest scam of 2022 so far has been $273 million in cryptocurrency.
Hacks are up sharply
Darknet market revenue is currently 43% lower than where it was through July 2021. This is mainly due to the closure and sanctioning of the Hydra Marketplace, “which for years had been the dominant darknet market, serving as a hub not only for the sale of drugs. , but for the sale of hacking tools, stolen data and money laundering services,” Chainalysis explained.
While this news is good for crypto investors and for the industry trying to appeal to the mainstream in a difficult time, there is bad news: Crypto hacks have increased sharply.
Through July 2022, $1.9 billion worth of cryptocurrency was stolen in hacking services, compared to just under $1.2 billion at the same time in 2021, the firm found.
It then warned that: “This trend does not appear to be reversing anytime soon, with a $190 million hack of cross-chain bridge Nomad and a $5 million hack of several Solana wallets already occurring in the first week of August. “
