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, losses in the crypto industry from breaches in 2023 decreased by more than half compared to 2022. Should we expect this decline to continue – or are we on the verge of a new scam outbreak?
The Number of Crypto Scams Has Declined
From January to November 2023, cybercriminals stole about $1.7 billion in 160 attacks – while the figure amounted to nearly $4 billion in 2022, according to TRM Labs data. Chainalysis reports similar numbers and adds that by the end of 2023, the volume of crypto fraud proceeds decreased by 29.2%. The organization notes that the illicit transaction volume decreased for the first time since 2020.
Factors influencing the decline of hacks
Here are three key factors that may have contributed to reducing crypto industry losses from hacks in 2023:
- Enhanced security measures, including real-time transaction monitoring and anomaly detection systems;
- Increased law enforcement efforts around the world to address cybercrime involving digital currencies;
- Increased industry coordination, with crypto exchanges, wallet providers, and blockchain networks more actively sharing information about vulnerabilities and threats.
Since DeFi protocols have become more secure, the revenues of the leading hacker groups have decreased. For example, the income of the notorious 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 of crypto scams since 2021 correlates with the decreased market activity. We have been trying to get ourselves out of the crypto winter for the last two years, and people have been extremely cautious about their money. On the contrary, bull runs are when the fear of missing out drives mass users – so it’s easy to fall for fraudulent suggestions that promise quick returns.
BTC halving will be a major factor for the bullish sentiment in 2024. We already see that it is translating into one of the biggest forecasted airdrop seasons – and, consequently, the number of people phished by fake airdrop websites is increasing. As the market revives, 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
The New Year’s Eve was no fun for the team of Orbit Bridge – the hackers attacked the cross-chain protocol. The intruders managed to withdraw crypto assets worth more than $80 million. Ozys, the company behind the protocol’s development, suspected a former employee of facilitating the hack.
Cross-chain bridge hacks may become a key type of crypto crime in 2024. As DeFi 2.0 evolves and diverse blockchains get increasingly integrated, cross-chain bridges are becoming a central element of crypto infrastructure – but often keep their vulnerabilities. Funds that back bridged assets on receiving blockchains must be stored somewhere, and such storage often becomes the target of attacks. Enhanced security measures and rigorous code audits are needed to address this problem.
2. Fake airdrops – classic method of massive scams
As crypto winter turns into crypto spring, many projects launch their airdrop programs to benefit from increased market activity. Scammers also profit: they launch fake airdrop portals that impersonate legitimate projects or influencers and offer users to connect their wallets. As soon as a victim does this, their funds are gone.
The Bitcoin halving is just around the corner, and we may witness the rise of the FOMO sentiment and people being ready to invest their money without due diligence. This may 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 nearly doubled since December 2023, accompanied by a spike in the SOL coin price. Deepfake videos of Solana co-founder Anatoly Yakovenko started popping up on YouTube with a promise to double funds to everyone who scans the QR code. Needless to say, people who transferred their funds to fraudsters have never seen their tokens again.
Similar deepfake videos across social media feature CZ, Elon Musk, and other influencers. As AI allows for more realistic “artwork,” it may become one of the main types of scams in (hopefully) bullish 2024.
Why We Should Stay Alert in 2024
Last year, the number of funds stolen due to crypto hacks and scams sharply declined. Protocols have become more secure, while the mixed market sentiment has not been conducive to scammers’ success. However, as the industry rebounds and new technologies emerge, we may see an increase in crypto fraud in 2024 – and it looks like it’s already starting to happen. Take care, and may your funds stay safe as the bull run unfolds.