Illegal crypto activity is more resilient than legitimate demand

by Arthur · August 25, 2022

Anonymous in black hoodie and neon mask hacking into a smartphone. — Chainalysis says hackers managed to get away with $1.9 billion worth of loot – Photo: Shutterstock

Despite the cryptosphere going through a harsh winter, the sector maintains its attractiveness to one sector – illegal users.

According to Chainalysis’ Mid-year Crypto Crime Update report, criminal activity appears to be more resilient in the face of price declines: Illegal volumes are down just 15% year-over-year, compared to 36% for legitimate volumes.

This is not true across the board. Some forms of crypto-based crime actually increased in 2022, while others decreased.

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Fraud falls in line with crypto values

Total fraud revenue for 2022 is currently $1.6 billion, down 65% from July 2021, but the market cap of the crypto sector has also fallen by roughly 70% since November.

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BTC to US Dollar

Scam revenues have been falling more or less in line with BTC prices since January. According to Chainalysis, the cumulative number of individual transfers to fraud so far in 2022 is the lowest in the last four years.

The report suggests that less tempting crypto returns led to fewer people falling for crypto scams.

Fewer crypto “brands”

It added that inexperienced users who are more likely to fall for scams are also less prevalent now that prices are falling.

A large number of the successful scams were the product of extreme scams such as JuicyFields.io and OmegaPro.world.

Both schemes were responsible for over a third of all crypto fraud after the first six months of 2022, with the JuicyFields.io network over $270 million.

Interestingly, while overall darknet market revenue fell 43% lower than July 2021 following Hydra’s shutdown, the remaining markets saw a significant increase in the number of individual incoming transfers.

Hacks on the rise

Through July 2022, $1.9 billion worth of cryptocurrency has been stolen in hacking services, compared to just under $1.2 billion at the same time last year.

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 (SOL) wallets already occurring in the first week of August.

SOL to US Dollar

Much of this can be attributed to the increase in funds stolen from DeFi protocols since they are uniquely vulnerable to hacking, as cybercriminals look for exploits in their open source code, according to Chainalysis.

Much of the value stolen from DeFi protocols can be attributed to bad actors associated with North Korea, such as the elite hacking outfit the Lazarus Group.

Chainalysis believes that North Korea-linked hackers have stolen $1 billion worth of cryptocurrencies from DeFi protocols in 2022.