In 2021, cryptocurrency adoption will reach unparalleled heights. The COVID-19 pandemic and the market’s surplus liquidity attracted new users as Bitcoin, and other major cryptocurrencies became value storage and conduits into new financial services.
Chainalysis, an on-chain analytics firm, produced a report last year that shows a 567 percent growth in cryptocurrency overall transaction volume compared to 2020. This indicator stood at $15.8 trillion, indicating that cryptocurrency adoption is rising “faster than ever before.”
However, the firm observed a surge in criminal cryptocurrency activity, which hit an all-time high in 2021, with addresses linked to crime earning $14 billion last year. When compared to 2020, when the metric stood at $7.8 billion, this implies an almost 50 percent rise. Chainalysis stated:
(…) Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency. But the fact that the increase was just 79% — nearly an order of magnitude lower than overall adoption — might be the biggest surprise of all.
In that regard, and with the increase of “legitimate” use cases for cryptocurrencies, Chainalysis claims that the fraction of trading volume attributable to illicit activity “has never been lower.” As shown in the chart below, this statistic has been steadily declining since hitting an all-time high of 3.37 percent in 2019 until last year, when it fell to 0.15 percent. The following was added by the company:
we have to caveat this figure and say that it is likely to rise as Chainalysis identifies more addresses associated with illicit activity and incorporates their transaction activity into our historical volumes.
According to the firm, the percentage of overall bitcoin trading volume for unlawful operations has shifted in the past as they detect addresses with probable linkages to crime and bad actors. The initial percentage for this metric in 2020 was 0.34 percent, which eventually changed to 0.62 percent.
According to Chainalysis, 2020 was a significant year for cryptocurrency illegal activities due to the discovery of the PlusToken Ponzi scheme. This contributed to an increase in the metric that year. According to the business, “crime is becoming a less and smaller component of the cryptocurrency ecosystem.”
The majority of criminal activity was supported in the decentralized finance (DeFi) sector between 2020 and 2021, as seen in the graphic below. According to Chainalysis, money laundering operations increased by 1,964 percent over this time period for DeFi protocols.
This decrease could be related to the supposed advancement of law enforcement tools for dealing with bad actors who use cryptocurrency. However, the corporation remains concerned about $14 billion in unlawful activities.
Nonetheless, the analysis estimates that much of that amount is due to a large increase in the price of most crypto assets through 2021 rather than an increase in criminal behavior. As a result, Chainalysis stated:
Following yesterday’s decline, the entire cryptocurrency market cap stands at $2.05 trillion as press time.
