The world is in lockdown due to the spreading coronavirus COVID-19, with bars, pubs and clubs forced to close.
The lockdown is hitting these drug-taking hotspots hard and having knock-on effects everywhere—including darknet drug dealers who accept bitcoin as payment.
It’s thought some $600 million worth of bitcoin was spent on darknet markets during the last three months of 2019, according to a recent report from bitcoin, crypto, and blockchain data research firm Chainalysis, with spending steadily rising over recent years.
However, bitcoin spending on darknet markets, which allow users to buy everything from illegal drugs to guns and stolen goods, has dropped since the coronavirus COVID-19 began spreading out of China in late February, Chainalysis has found.
“The effects of the COVID-19 [bitcoin] price drop on darknet markets is especially interesting,” the Chainalysis team wrote in a blog post this week.
The bitcoin price crashed in mid-March, losing almost half its value in the space of a week, as markets around the world went into free fall in anticipation of a global coronavirus-induced shutdown.
“Darknet market revenue has fallen much more than we’d expect following bitcoin’s recent major price drop,” Chainalysis reported, noting that supply problems for Mexican drug cartels and dealers in China’s Hubei province could be “hampering darknet market vendors’ ability to do business.”
“Perhaps darknet market customers aren’t buying as many drugs given the public health crisis,” Chainalysis wrote.
“It’s also possible that vendors slowed down sales during the price drop, out of fear that the bitcoin they accept one day could be worthless the next. But it’s also likely that COVID-19 itself is making it harder to sell drugs at the moment.”
Across the U.S. and Europe, bars, clubs, and pubs are settling into what some fear could be a long-term lockdown, designed to limit the spread of the coronavirus COVID-19.
The White House coronavirus co-ordinator has said recent projections show between 100,000 and 200,000 Americans could die due to COVID-19, with over 181,000 confirmed coronavirus cases and 3,606 deaths in the country so far—more than in China, where the disease was first discovered.
It’s thought as many as three in every four Americans are now, or about to be, under some form of lockdown, only allowed out to get essential supplies and medicines or limited forms of exercise.
The economic consequences of the mass lockdown have already spread to every corner of society, with millions of people losing their jobs and a global recession a near certainty despite extreme action from the U.S. government and central banks around the world to limit its impact.
Chainalysis, which closely follows bitcoin and cryptocurrency spending, has previously found that darknet markets’ revenue has historically had a weak inverse correlation with the bitcoin price.
“Darknet market activity is much less affected by the ebbs and flows of the market than other types of services, suggesting typical customers are willing to spend on drugs (and, to a lesser degree, other illicit stock such as stolen credit card data, firearms, and more) no matter how much their bitcoin is worth. However, the correlational relationship has now reversed.”