A new report by blockchain forensics experts at Chainalysis found that darknet market revenue largely leveled off in the second quarter of 2022, coinciding with the shutdown of Hydra in early April. The cumulative amount of (traceable) cryptocurrency deposits to darknet markets by July was 43% below what it was by July of last year, and approx. 20% lower than it was by July of 2020.
This behavior breaks the trend of the first three months of the year, in which the total value of deposits to darknet markets exceeded those in the first quarter of 2021 and 2020.
Chainalysis also observed an uptick in the value of deposits going to other markets immediately following Hydra’s closure, suggesting that some displaced revenue was being absorbed by competitors.
Though it started the year strong, DNM deposit activity slowed considerably in Q2. Source: Chainalysis
Meanwhile, the cumulative value of crypto sent to scams this year is now lagging 2021, 2020, and 2019 in terms of where it was by July of those years. Thought the phenomenon is partially due to falling crypto prices this year, it is also believed to be due to the exit of “gullible newbies” from the market, or those who are not investment-savvy as crypto veterans. The fall of scam revenue in 2022 also correlates significantly with the declining price of BTC.
The two categories of “illicit” crypto transactions that are thus far on the rise in 2022 are hacked and stolen funds. The total value of crypto funds taken by hackers by July this year was almost double what it was in July 2021, largely due to what Chainalysis describes as a “stunning rise” in funds stolen from insecure DeFi platforms — a trend that has been amplified over the last 12 months.
Chainalysis concluded in the report that the effects of law enforcement have been the primary driver for an overall decrease in transfer of “illicit” crypto funds, and that the shutdown of Hydra has “dampened the entire sector.”