Chainalysis, a provider of cryptocurrency tracking tools to companies and law enforcement, recently published a report revealing that darknet markets are still thriving despite law enforcement’s best efforts to shut them down.
Darknet markets are immune to the volatility of cryptocurrency markets, according to our research findings. Get a preview of our deep dive into darknet markets with the first blog in our Crypto Crime series. #cryptocurrency #cryptocrime https://t.co/blJCgZdxRA
— Chainalysis (@chainalysis) January 18, 2019
In the report, Chainalysis analyzed transactions on major darknet marketplaces, finding that total Bitcoin (BTC) volumes rose to an average of $2 million per day in 2018, despite falling prices throughout the year. Interestingly, the researchers noted that darknet market activity and overall market performance had an inverse relationship last year, as lower prices led to more activity.
While transaction numbers within the marketplaces are rising, the total value of Bitcoin inflows was actually down in 2018. The collapse in Bitcoin’s value last year resulted in a total USD inflow value of $600 million in 2018 versus $700 million in 2017, despite the transaction growth.
The report indicates that inflows were also briefly impacted by the closure of major darknet markets AlphaBay and Hansa in mid-2017. However, inflows began to grow again in late 2018 as the markets were replaced and Chainalysis predicts this trend will continue.
“The reason for that drop is more law enforcement activity,” Chainalysis senior economist Kim Grauer told Reuters. “It would be misleading to think that this year it (the volume) will go down.”
Nonetheless, the report shows that illicit transactions continue to represent a lower percentage of Bitcoin’s total economic value as the network continues to mature. This data coincides with recent findings from the DEA showing the ratio of legal to illegal Bitcoin activity has flipped so that now only 10% of all transactions on the blockchain are related to criminal activity.
As law enforcement’s Bitcoin tracking technology continues to improve, it will likely result in a push towards more secure privacy coins that allow for better fungibility.
Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.