Chainalysis recently reported that crypto scammers’ income had been hit by the impact of the coronavirus, but looking at the data could offer up a more direct reason for such a collapse – the Bitcoin price. Chainalysis claimed in the piece that “Covid-19 is crushing the biggest cryptocurrency scams”, but the link between the two events doesn’t stand up, and the link to the price of Bitcoin has much more going for it, both in terms of data and reasoning.
No Natural Correlation
Chainalysis’ report found that the coronavirus pandemic led to a 33% drop in the income of crypto scammers, with well-established Ponzi schemes and fraudulent investment vehicles noticing a 61% reduction in income at the peak. This is a surprisingly high drop, but the link to the increase in coronavirus cases in the West during the same period doesn’t seem to offer a natural correlation – after all, it’s not like scammers’ business models are reliant on the continuation of society as usual.
If anything, with people stuck at home with nothing to do, you might even expect an increase in speculative plays – online casinos, for example, have witnessed a huge increase in activity over the same period. But this hasn’t happened with crypto scams, despite people being more likely than ever to stumble across them.
It’s All in the Bitcoin Price
The reason for the abrupt drop could be far closer to home. As well as the West seeing an increase in coronavirus cases, something else happened during the same time frame in March – the Bitcoin price crashed 57%, from $9,000 to $3,850, in the space of one week. Chainalysis does mention this as a possible factor, stating that “we find that the loss of value is caused almost entirely by cryptocurrency price drops”, but then continues to give more weight to the coronavirus outbreak.
This would be understandable if the pandemic had led to the Bitcoin price crashing to $3,850 in the first place, but this was mainly due to the actions of BitMEX and to a lesser extent other margin trading exchanges, so we can’t even make that link.
No Link Between COVID-19 and Scammers’ Intake
What we have seen since Bitcoin’s price bottomed is that the amount of money sent to scammers has increased in line with Bitcoin’s revival, while the impact of coronavirus in the West has worsened, further destroying the idea of a link between the two.
There is therefore, in our opinion, almost no link between coronavirus and scammers’ income, with Bitcoin’s price action being almost entirely responsible.