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 all-time high of over $3 trillion. This market, dominated by bitcoin and ether -- the native token of Ethereum, the platform for creating non-fungible tokens (NFTs) and decentralized finance (DeFi) apps and games -- currently weighs $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 causing prominent crypto lenders like Voyager Digital and Celsius Network to file for Chapter 11 for bankruptcy.
Crypto Scam Revenues Are Down 65%
Another category of individuals has lost a lot in this crisis, and it's not the ones you think of right away: the scammers.
According to research firm Chainalysis, illicit activity falls with the rest of the market. Scam revenues through July 2022 sit at $1.6 billion, 65% lower than where they were at the end of last July, and darknet market revenues are trending 43% lower than last year, the firm said in a recent report.
Cryptocurrency transaction volumes this year for both illicit and legitimate entities are tracking behind 2021 through July. However criminal volumes are down 15% year over year, compared to 36% for legitimate volumes.
Since January 2022, scam revenue has fallen more or less in line with bitcoin pricing. Bitcoin prices fell by 49.5% between Jan. 1 and July 31. The number of transfers to scams made by retail investors so far in 2022 is the lowest it’s been in the past four years, Chainalysis said.
"Those numbers suggest that fewer people than ever are falling for cryptocurrency scams," the firm concluded. "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."
"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 declining, as opposed to when prices are rising and they’re drawn in by hype and the promise of quick returns."
The largest scam of 2022 so far has been $273 million worth of 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 shutdown and sanctioning of Hydra Marketplace, "which for years had been the predominant darknet market, acting as a hub not just for drug sales, but for sales 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 at a difficult time, there is bad news: Crypto hacks have increased sharply.
Through July 2022, $1.9 billion worth of cryptocurrency has been stolen in hacks of services, compared to just under $1.2 billion at the same point in 2021, the firm found.
Then it warned that: "This trend doesn’t appear set to reverse any time soon, with a $190 million hack of cross-chain bridge Nomad and $5 million hack of several Solana wallets already occurring in the first week of August."
