Despite the crypto market witnessing a decrease in chainalysis prices, fraud losses related to cryptocurrency have experienced an unexpected nosedive. According to reports, these fraudulent activities like NFT scams and investment cons saw a 46% reduction from 2021 figures amounting to $5.9 billion in 2022. Nonetheless, two types of criminal activity remained unscathed by this decline – romance scams and theft through venture capital scams.
The Chainalysis Report Reveals Stunning Data
According to a report from Chainalysis released on February 16th, the sharp decline in fraud losses was primarily attributed to the slump in cryptocurrency prices. This is because when those values diminish, fraudulent behaviors also tend to fall. Interestingly enough, though, two types of scams – romance and giveaway scams – escaped this downward trend, with their levels remaining relatively consistent despite crypto price drops.
Chainalysis research has uncovered a correlation between the cost of Bitcoin and fraudulent activity in 2010; there is typically a three-week delay from when prices move, and losses resulting from fraud transpire. Not all common scams follow this pattern; for instance, romance scams or giveaway scams often cause more damage when cryptocurrency values fall rather than rise.
Romance Scams Are One of the Biggest Risks
Although romance scams accounted for the lowest sum of losses when compared to other types of scams in 2022, they produced an average loss per person of almost $16,000 – nearly three times higher than any other form. What makes these especially dangerous is that scammers exploit victims’ emotions by bonding with them and convincing them to ask for assistance or money.
Chainalysis highlights that this type of fraudulent activity is likely to occur when the cryptocurrency market takes a downturn since it plays on people’s emotions rather than offering lucrative profits. “The goal for victims isn’t so much getting rich quickly as it is assisting someone they may have feelings for,” Chainalysis stated. “That doesn’t mean though that it won’t still be effective like any other scam.”
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