The latest report published by Chainalysis showed that the deposit of cryptocurrencies in darknet markets increased considerably after the closure of Hydra, proving once again the legend that Hydra’s heads regenerate.

On April 5, 2022, the then largest active online illegal market had been taken down by German authorities, who were able to confiscate over 500 bitcoins from operators.

The following image was the only thing that appeared on the site after the police operation against the market that allowed trading stolen data, and renting hackers to carry out thefts (setting up a red market).

Message from the German Police

However, despite the successful operation, other “Hydra heads” began to grow. On-chain data analysis firm Chainalysis reported in a report published on Tuesday that the number of deposits in darknet markets (DNM) began to rise after the episode.

Deposits in darknet markets per year

According to the company’s researchers, the increase represents “the shift of Hydra’s suppliers and customers to new markets, in search of a replacement”. However, there has been a relevant decline in revenue from illegal markets in general showing a tangible impact from law enforcement’s growing ability to fight crypto-based crime, according to Chainalysis.

Another graph made available in the study was precisely the general revenue of the underground markets, which was significantly affected not only by an alleged lower activity, but also by the drop in the price of cryptocurrencies.

Monthly amount received by darknet markets per year

Just outside the scope of underground markets, and encompassing all kinds of perceived illicit activity on-chain, such as scams and hacks, the main finding of the recent study was that theCryptocurrency crimes decreased by 15% in 2020.

The drop in prices seems to explain, for example, the decrease in revenue from scams in general. According to Chainalysis: “Total revenue from scams in 2022 is currently at $1.6 billion, 65% lower than at the end of July 2021.”

Relationship between the price of BTC and revenue from cryptocurrency scams and fraud.
Relationship between the price of BTC and revenue from cryptocurrency scams and fraud.

“We also hypothesized that new inexperienced users who are more likely to fall for scams are less prevalent in the market now that prices are decreasing, as opposed to when prices are rising and they are lured by advertising and the promise of quick returns. .” wrote the study authors.

Cumulative number of monthly scam deposits per year.
Cumulative number of monthly scam deposits per year. The difference between 2022 and past years is remarkable.

If you want to know more detailed information about the state of illicit cryptocurrency activity, read Chainalysis’ full report.

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