In January 2024 alone, cryptocurrency projects lost $127 million due to hacking and fraud – six times more than in January 2023 and three times more than last December. In the meantime, crypto industry losses due to breaches have fallen by more than half in 2023 compared to 2022. Should we expect this decline to continue – or are we on the brink of another scam outbreak ?
The number of crypto fraud has decreased
From January to November 2023, cybercriminals stole approximately $1.7 billion in 160 attacks – up from nearly $4 billion in 2022, according to TRM Labs data. Chainalysis reports similar figures and adds that by the end of 2023, the volume of proceeds from crypto fraud had fallen by 29.2%. The organization notes that illegal transaction volume has decreased for the first time since 2020.
Factors influencing the decrease in hacks
Here are three key factors that may have helped reduce crypto industry losses due to hacks in 2023:
- Enhanced security measures, including real-time transaction monitoring and anomaly detection systems;
- Increased law enforcement efforts around the world to tackle cybercrime involving digital currencies;
- Improved coordination within the industry, with crypto exchanges, wallet providers and blockchain networks more actively sharing information about vulnerabilities and threats.
Since DeFi protocols have become more secure, the leading hacker groups’ revenues have declined. For example, the income of the infamous Lazarus and Kimsuky groups dropped from $1.7 billion in 2023 to $1 billion in 2023, although the number of platforms they attacked increased.
Market cycle vs crypto scams
The decline in crypto scams since 2021 is related to decreased market activity. We’ve been trying to get out of the crypto winter for the past two years, and people have been extremely careful with their money. On the contrary, bull runs happen when the fear of missing out drives big users – so it’s easy to fall for fraudulent suggestions that promise quick returns.
The BTC halving will be a major factor driving bullish sentiment in 2024. We are already seeing this translate into one of the largest predicted airdrop seasons – and as a result, the number of people being phished by fake airdrops is increasing websites. As the market rebounds, we may see more and more scams of this and many other types.
Top 3 crypto crime predictions for 2024
1. Cross-chain bridge hacks
New Year’s Eve was not fun for the Orbit Bridge team – the hackers attacked the cross-chain protocol. The intruders managed to withdraw crypto assets worth more than $80 million. Ozys, the company behind the development of the protocol, suspected a former employee of facilitating the hack.
Cross-chain bridge hacks could become a key form of crypto crime in 2024. As DeFi 2.0 evolves and various blockchains become more integrated, cross-chain bridges become a central part of crypto infrastructure – but they often retain their vulnerabilities. Funds that backbridge assets when receiving blockchains need to be stored somewhere, and such storage often becomes the target of attacks. Enhanced security measures and stringent code audits are needed to address this issue.
2. Fake airdrops – classic method for mass fraud
As crypto winter turns into crypto spring, many projects are launching their airdrop programs to take advantage of the increased market activity. Scammers are also taking advantage, launching fake airdrop portals that pose as legitimate projects or influencers and allow users to link their wallets. Once a victim does this, their money is gone.
Bitcoin’s halving is just around the corner, and we may witness the rise of FOMO sentiment and people willing to invest their money without due diligence. This could contribute to an increase in the number of fake airdrops.
3. Deepfake videos on YouTube and other social media
Another example of a scam in a recovering market is the recent Solana fraud. The platform’s TVL has almost doubled since December 2023, accompanied by a spike in the SOL coin price. Deepfake videos from Solana co-founder Anatoly Yakovenko appeared on YouTube promising to double the money to anyone who scans the QR code. Needless to say, people who transferred their money to fraudsters never saw their tokens again.
Similar deepfake videos on social media feature CZ, Elon Musk and other influencers. As AI enables more realistic ‘works of art’, it could become one of the top scams in (hopefully) bullish 2024.
Why we must remain alert in 2024
Last year, the number of stolen funds due to crypto hacks and scams fell sharply. Protocols have become more secure, while mixed market sentiment has not been conducive to scammers’ success. However, as the industry recovers and new technologies emerge, we could potentially see an increase in crypto fraud in 2024 – and it looks like this is already starting to happen. Take care and may your money remain safe as the bull run unfolds.
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