The decline of illegal activity against the background of a bear market

Time passes, and the crypto market is still in a bearish phase. We have already answered the question “What is it?” and we determined that the relationship between cryptocurrencies and stocks became possible due to the fact that institutional investors were actively investing in cryptocurrency. This reflects the maturity of digital assets and leads to the emergence of new financial products and regulatory methods. If you haven't read our article where we explained how the crypto market got into a bearish phase, then it's time - “Link”

Besides the decline of the cryptocurrency market, cybercrime activity also suffered a decline. How is it interconnected? - let's figure it out.

New people and projects

During its history, any financial market can be either in a phase of decline (bearish phase) or in a phase of rapid growth (bullish phase). The active growth of bitcoin, hence the entire DeFi market, caused a huge information noise, which attracted many newcomers into the sphere.

New people in the crypto industry have become potential victims who have been hunted by scammers. There are an infinite number of types of crypto scam, and beginners who don’t have any experience often fall for the deception.

There are also a lot of new projects that manage to get enough investments, which, as it turns out after hacking, are under poor protection.

Now, the situation is different. During the bear market, there are fewer new people, as well as projects in DeFi, therefore, there is less profit for cybercriminals and hackers.

General picture

If we look at the graph of columns, we will see that the record maximum of criminal activity was in 2019, which surpassed 2017 by almost two and a half times.

Now let's look at the bitcoin chart in these time intervals -

2017 and 2019 are the times of the growth of the bitcoin exchange rate and the share of criminal activity. However, it is worth mentioning that the correlation between the Bitcoin exchange rate and the percentage of cybercrimes is not direct since 2020 was remembered for the fact that the growth of bitcoin was phenomenal, while the share of criminal activity was only 0.62% for the year.

Why is the correlation not direct?

Precautions, protection, and regulation do not stand still, and by 2020, more and more exchanges began to use the KYC process of verifying the client of a financial institution by using documents confirming his/her identity. Criminal money has become much more difficult to launder, therefore, withdraw and spend.

Since 2018, cybercriminals have started to use DeFi protocols more actively. Just compare 2% of illegally obtained crypts in 2017 against 17% in 2018 that went to laundering through DeFi protocols. By 2020, the trend continued. In 2022, there was a blocking of DeFi crypto mixers, which criminals used for money laundering. The most sensational case is the blocking of Tornado Cash.

Conclusion

If we follow the trend that is reflected in the columns, the share of activity in 2023 will not be able to break record highs regardless of the growth of bitcoin. It happened because the correlation between the BTC price and the share of criminal activity can no longer be direct.