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Illicit crypto activity more resilient than legitimate demand

By Carine Lee

04:00, 26 August 2022

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

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

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

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

Scams fall in line with crypto values

Total scam revenue for 2022 currently sits at $1.6bn, 65% lower than July 2021, however, the market capitalization of the crypto sector has also fallen by roughly 70% since November.

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BTC to US dollar

Scam revenue has fallen more or less in line with BTC pricing since January. According to Chainalysis, the cumulative number of individual transfers to scams so far in 2022 is the lowest in the past four years.

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

Fewer crypto ‘marks’

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

A large number of the successful scams were the product of outlier scams like JuicyFields.io and OmegaPro.world.

XRP/USD

0.60 Price
+3.380% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

ETH/USD

3,502.08 Price
-0.300% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

SOL/USD

170.30 Price
-0.150% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

BTC/USD

66,707.80 Price
-0.560% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

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

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

Hacks on the rise

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

This trend does not seem to reverse any time soon, with a $190m hack of cross-chain bridge Nomad and $5m 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 rise in funds stolen from DeFi protocols since they are uniquely vulnerable to hacking, as cybercriminals go looking for exploits in their open source code, according to Chainalysis.

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

Chainalysis is of the opinion that North Korea-affiliated hackers have stolen approximately $1bn worth of cryptos from DeFi protocols in 2022.

Markets in this article

BTC/USD
Bitcoin / USD
66707.80 USD
-375.15 -0.560%
SOL/USD
Solana / USD
170.3016 USD
-0.2586 -0.150%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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