Crypto scam revenue dips while hacks and stolen funds increase

Chainalysis’s mid-year report indicates that cryptocurrency scams have decreased while hacks and stolen funds have increased.

Chainalysis, one of the leading analytics firms in the crypto space, has published its midyear report. The midyear report highlighted some of the trends within the crypto space from January to June 2022.

According to Chainalysis, trading volume for illicit activities in the first half of the year was 15%, down from the 36% recorded during the same period last year. The team said;

“Overall, criminal activity appears to be more resilient in the face of price declines: Illicit volumes are down just 15% year over year, compared to 36% for legitimate volumes. However, the aggregate data doesn’t tell the whole story. If we dig into specific forms of cryptocurrency-based crime, we find that some have actually increased in 2022, while others have declined more than the market overall.”

Scam revenue for the first half of the year is 65% lower compared to the same period last year. Total scam revenue for 2022 currently sits at $1.6 billion, Chainalysis added. 

The analytics firm proposed that the decline in scam revenue can be linked to price declines since Bitcoin and the other cryptocurrencies have dipped by more than 50% since the start of the year. 

Chainalysis added that the number of transfers to scams at this point in the year is also the lowest seen in four years. The firm said the scam revenue could be down because inexperienced users are not too prevalent in the market now that the prices of most coins are down.

Despite the decline in scams, Chainalysis noted that hacks and stolen funds in the crypto space have increased since the start of the year. 

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. Chainalysis said it doesn’t see this trend reversing anytime soon. 

The $190 million hack of cross-chain bridge Nomad and the $5 million hack of several Solana wallets already occurring in the first week of August show that we might see more hacks and stolen funds this year.

Chainalysis wrote that;

“Additionally, we shouldn’t expect theft to drop based on cryptocurrency market movements the way scamming does — as long as crypto assets held in DeFi protocol pools and other services have value and are vulnerable, bad actors will try to steal them. The only way to stop them is for the industry to shore up security and educate consumers on how to find safe projects to invest in. Law enforcement, meanwhile, must continue developing their ability to seize stolen cryptocurrency to the point that hacks are no longer worthwhile.”