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There have been fewer successful cryptocurrency scams this year, according to cryptocurrency data from Chainalysis. This is because the market has seen slashed prices leading to an exodus of inexperienced traders and new, vulnerable cryptocurrency users.
As per a report from Chainalysis, the total revenue from cryptocurrency scams in 2022 is sitting around $1.6 billion USD. While it sounds like a significant amount of the market lost, it represents a 65% drop in money lost in crypto scams from the previous 12 months. This has been linked to the falling prices in the market:
“Since January 2022, scam revenue has fallen more or less in line with Bitcoin pricing. [It’s] not just scam revenue falling — the cumulative number of individual transfers to scams so far in 2022 is the lowest it’s been in the past four years.”
Eric Jardine, the leading researcher at Chainalysis cybercrime division notes that the bull market tends to attract more scams because there are more inexperienced crypto investors entering the market and there are more potential investment opportunities than in a bearish market, when opportunities are limited.
Why are crypto scams fewer during a bear market?
Chainalysis’ cybercrimes research lead Eric Jardine, the author of the report, explains that crypto investors are more likely to fall for scams during bull markets when the investment opportunities and outsized returns are most enticing to victims.
According to Jardine, 2021 also saw two massive cryptocurrency scams that added to the $3.5 billion USD loss in cryptocurrency scams over the year. The PlusToken and Finiko schemes took a knock out of the legimitate revenue of the cryptocurrency market as the scammers pocketed the money. In 2022, however, compared to 2022, the largest scam has only brought in $275 million USD.
Additionally, the rise in decentralised finance (DeFi) increased the potential for scammers to infiltrate the wallets of users. Unregulated and open-scource code is still emerging and protocols are vulnerable to the attacks from scams. As the industry continues to evolve and more people are educated in the space, it’s likey that we’ll see fewer successful hacks and the amount in funds lost to scams will decrease.